Amid a frenzy of change in the regulatory arena, bank executives at investor conferences this week expressed optimism around the supervisory approach that’s likely to result, although at least one big-bank CEO said he wants balance and “the right regulation.”
Bank of America CEO Brian Moynihan, speaking at his own company’s conference Wednesday, rattled off recent changes at federal banking agencies, saying “it appears the first step is, let’s stop everything and take stock.”
“That is a classic re-engineering effort,” Moynihan said, seemingly referring to the Consumer Financial Protection Bureau’s stop-work orders. “You stop everything, assess it, and then you go do the next step.”
“It’s sort of the Hippocratic Oath: First, we do no more harm,” Moynihan added.
Bank of America is one of three banks, along with Early Warning Services, sued by the CFPB in December over the Zelle payments platform.
At the conference a day earlier, JPMorgan Chase Chief Operating Officer Jennifer Piepszak said the new Trump administration and its changes “are taking all the oxygen in the room.”
Speaking at a UBS conference Tuesday, Piepszak’s C-suite peer, JPMorgan CFO Jeremy Barnum called it a “shock and awe moment.” Barnum said that while it may be tempting to speculate, he’s watching to see how the administration’s moves play out.
“We want balanced, coherent regulation that is not reflexively anti-bank, and that allows banks to play an appropriate role supporting the economy … without in any way conflicting with the safety and soundness of the system,” Barnum said.
Wells Fargo CFO Mike Santomassimo, also at the UBS conference Tuesday, noted “the tone’s changed quite a bit” on the regulatory front.
Bank executives also welcomed efforts to increase transparency in the Federal Reserve’s stress testing process; in December, the central bank said it aimed to improve that aspect of stress testing; bank trade groups sued the Fed over its stress testing process a day later.
Santomassimo expects “more meaningful discussion” this year on stress test changes, and said he feels positive about the direction the capital requirements rule may be headed in.
“It feels like that’ll be constructive,” he said.
The industry would like a Basel III rule to be finalized, the CFO said, to provide certainty around balance sheet management; Wells CEO Charlie Scharf in December expressed some frustration on the topic, saying the lender wants the rule finalized for “closure.”
Moynihan said the challenge may be consistency.
“We’ve got to make sure stuff sticks to the ribs,” Moynihan said. “If you just keep swinging this pendulum back and forth, it’s hard to operate a company.”
“Some of these rules and regulations got way past what the intended statutes were,” he said, highlighting capital requirements and consumer compliance activity. “Now, we’ve got to bring it back.”
KeyBank CEO Chris Gorman, speaking Tuesday at the BofA conference, noted change at federal agencies may take time, since people at the top come and go, but those working at the agencies are typically career staffers.
“It’s a little bit of a dial, more than a switch,” Gorman said.
“One of the things that I think people underestimate in the regulatory environment that we’re in is just the amount of bandwidth that is just taken up by preparing for an exam, participating in the exam, meeting after the exam,” he added. “So to the extent that there is some flexibility there … time is the most valuable resource that any of us have, so I think that’s important.”
Flagstar CEO Joseph Otting, who served as head of the Office of the Comptroller of the Currency during the first Trump administration, said bank supervision is an area in which comptrollers are able to exert a fair amount of influence.
A new comptroller will “put things in the context … of, what’s the most important?” Otting said at the BofA conference Tuesday.
Rodney Hood took over as the OCC’s acting comptroller Monday; on Tuesday, the White House nominated Jonathan Gould, an agency veteran, to lead the OCC.
Otting said he expects the White House to want banks active in the market.
The “speeding ticket part of this job,” as Otting called the act of catching someone speeding, writing a ticket and devoting effort to that, “is probably going to diminish,” he said.
