Citigroup’s Dugan Says US Capital Plan Threatens Bank Lending

Citigroup Inc. Chairman John C. Dugan said US plans to hike capital buffers for the biggest Wall Street banks are unwarranted and will push lending and intermediation away from the banking sector.

(Bloomberg) — Citigroup Inc. Chairman John C. Dugan said US plans to hike capital buffers for the biggest Wall Street banks are unwarranted and will push lending and intermediation away from the banking sector. 

The proposals appeared “somewhat bizarrely” to be a response to the problems at US regional banks in March, Dugan told Bloomberg Television’s Francine Lacqua on Wednesday. The eight biggest institutions — including JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp. and Citigroup — would have to increase their capital by about 19% under the plans. 

“We believe it really will have a material impact on the amount of lending that US companies can do generally, which is not a good thing when the economy is more or less in a precarious position,” Dugan said. “Our largest banks including Citi are very strong from a safety and soundness perspective in terms of capital levels and liquidity levels.” 

The effort by the US Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency is tied to Basel III, an international regulatory agreement that began more than a decade ago in response to the 2008 financial crisis. Democratic regulators argue the failures of Silicon Valley Bank and Signature Bank in March, followed by First Republic Bank’s collapse in May, injected urgency into the need for tougher rules.

Dugan weighed in on the redundancies under Chief Executive Officer Jane Fraser and said there wasn’t a specific number of how many people would be laid off. “It’s about making sure we get the roles right to simplify the company,” he said. “In a couple of years, we believe it will be a much simpler bank, our expenses will go down, our revenues will go up as a result.”

On the violence in Israel, Dugan said the bank’s top priority was the safety of its staff, and said the bank is monitoring the impact on the wider economy.

“It’s already affected oil prices and commodity prices but I think we’re all just going to have to see how much this expands,” he said. “So far it is pretty contained.”

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