Financial Services Reforms Help, Bank of America CEO Says
October 11, 2010
The bevy of international and U.S reforms growing out of the recent worldwide financial crisis, once implemented, “should contribute to the future stability of the financial services industry,” said the president and CEO of the nation’s largest bank (in assets) at a Club Luncheon Oct. 8.
In endorsing what he called the “unprecedented” surge of rulemaking, Bryan T. Moynihan said that “without doubt, the U.S. financial services system needs to change.” He spoke at the outset of the Oct. 8-10 annual meeting of the International Monetary Fund.in Washington.
Moynihan predicted that BOA and other U.S. financial institutions will successfully meet newly negotiated international rules that require banks to hold 7% of their risk-bearing assets in reserve – up from 2%. The change is due to be approved in November by the G-20 group of industrialized nations in November.
Calling his bank “a strong supporter of robust capital standards,” Moynihan said that BOA and most other U.S. banks “have raised substantial amounts of capital and can comply with the rules by managing our balance sheets carefully.”
Moynihan also spoke approvingly of financial reforms in the Dodd-Frank Act signed by President Obama in July.
The act’s creation of a new consumer bureau “should prevent the re-emergence of sub-prime lending, if done right,” Moynihan said. And provisions that tighten regulation of derivatives, he added, “should provide greater transparency.”
Moynihan, who took over BOA’s helm last January, called the financial crisis of the last two years “mostly behind us.” He pointed to “continuing signs of life in the U.S. economy every day,” with jobless claims stabilizing, manufacturing expanding, and consumer spending growing.
But he cited headwinds that are impeding growth. Among them: continuing high unemployment, the tendency of both companies and consumers to hold onto cash because of future uncertainty, the rise in government debt and declining home ownership.
Regarding home ownership, Moynihan said that BOA’s Oct. 1 decision to freeze foreclosures in states in which foreclosure cases are in litigation, will not have substantial impact on the housing market. BOA announced the freeze, he explained, because it needs to “double check” its foreclosure documents for potential errors. He said the process will take a few weeks.
Asked if the financial services firms’ profits are too high, Moynihan said that the industry’s earnings, though recovering from their recent plunge, are “not where they should be.” Prior to the crisis, however, he said the industry had been guilty of “engineering profits, and I think we learned our lesson.”
Still, he defended large banks, whose role many policymakers want to curb. “Banks our size are needed,” he said, “to support an economy of our size.”
-- Bill Miller, firstname.lastname@example.org