U.S. regulators unveiled a sweeping overhaul Thursday that would direct banks to set aside billions more in capital to guard against risk, which was immediately slammed by the industry as “misguided.”
If fully implemented, the proposal would raise capital requirements for large banks by an aggregate 16 per cent from current levels, with the brunt felt by the largest and most complex firms, regulators said.
Current rules require banks to keep a certain amount of capital on hand as a percentage of how much they lend out. The idea is to restrain them from loaning out too much, and the ratios for U.S. lenders have not been raised in years.
The industry is already warning that such a big hike could force them to trim services, raise fees, or both.
U.S. officials argued Thursday that such costs would be more than offset by the benefit of a more resilient banking system.
The U.S. Federal Deposit Insurance Corporation bailed out numerous lenders and depositors this year that it was not obligated to do, and is now seeking to tighten regulations. (Peter Morgan/The Associated Press)
The proposal, approved by the Federal Deposit Insurance Corporation (FDIC) and set to be voted on by the Federal Reserve, marks the first in an extensive effort to tighten bank oversight, particularly in the wake of spring turmoil that saw three large financial firms fail.
However, the effort was not unanimous. Two Republican members of the FDIC voted against the proposal as misguided and onerous, and two Republican members of the Fed indicated in prepared remarks they would also oppose the package on similar grounds.
Fed chair Jerome Powell, a Republican who was renominated to the post by President Joe Biden, said in a prepared statement he supported advancing the proposal to receive public comment, but added regulators must strike a “difficult balance.”
“Congress and the American people rightly expect us to achieve an effective and efficient regulatory regime that keeps our financial system strong and protects our economy, while imposing no more burden than is necessary,” he said.
Basel regulations
The proposed rule, which would implement a 2017 agreement which originated via the Basel Committee on Banking Supervision, aims to overhaul how banks gauge their riskiness, and in turn how much reserves they must keep as a cushion against losses.
Fed Vice Chair for Supervision Michael Barr said the proposal better aligns capital requirements with risk, ensuring a more stable financial system.
The proposal would overhaul how banks must measure risk from lending, trading activities and internal operations. In several cases, the plan would scrap a prior reliance on bank internal models to measure various types of risk, instead opting for a standardized approach, which regulators argue would produce more consistent and comparable results.
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The proposal also reverses previous relief for banks with over $100 billion US in assets, after several mid-sized firms failed in the spring. Under the plan, banks of that size would have to account for unrealized gains and losses on some securities, as well as adhere to a stricter requirements as to how much leverage they can have.
The largest U.S. banks like JPMorgan, Citibank, Bank of America and others would see their capital requirements go up 19 per cent on average, while banks with $250 billion or more would go up an average of 10 per cent, and banks with $100 billion-$250 billion up an average of 5 per cent, in line with prior expectations.
Shares of major banks were flat or down on the news.
The Securities Industry and Financial Markets Association said a proposed operational risk capital charge would penalize firms that are involved in fee-based wealth management and investment banking activities.
“Imposing a punitive capital charge on businesses that provide steady fee income is misguided,” said SIFMA president and CEO Kenneth E. Bentsen, Jr in a statement.
FDIC chair Martin J. Gruenberg says capital ratio rules are in need of overhauling. (Evelyn Hockstein/Reuters)
The sweeping proposal, which spans over 1000 pages and asks for input on dozens of topics, will kick off an intense lobbying battle by the banking industry as firms seek to soften, delay, or otherwise derail the effort. Regulators said they will take public input on the proposal until November 30, and aim to have the requirements fully phased in by July 1, 2028.
Top officials at banks like JPMorgan Chase, Bank of America, and Morgan Stanley have warned stricter rules could force them to pull back from services or increase fees. Analysts say it could take years of retained earnings to comply, pinching their ability to boost dividends or buy back shares.
Agency officials said Thursday most banks already have enough capital to meet the proposal, and firms that need to catch up would need at most two years of retained earnings to do so.
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
