Latest news with #financialreform
Yahoo
a day ago
- Business
- Yahoo
Bessent calls for deeper US bank regulatory reforms, scrapping dual capital requirements
By David Lawder and Andrea Shalal WASHINGTON (Reuters) -U.S. Treasury Secretary Scott Bessent on Monday called for deeper reforms of what he called an antiquated financial regulatory system and said regulators should consider scrapping a "flawed," Biden-era proposal for a dual capital requirement structure for banks. Speaking at the start of a Federal Reserve regulatory conference, Bessent said excessive capitalization requirements were imposing unnecessary burdens on financial institutions, reducing lending, hurting growth and distorting markets by driving lending to the non-bank sector. "We need deeper reforms rooted in a long-term blueprint for innovation, financial stability, and resilient growth," Bessent said in prepared remarks. The Trump administration is pursuing a broad reform agenda aimed at cutting rules governing financial institutions, including capital requirements, arguing that such actions will boost economic growth and unleash innovation. Bessent said regulators have for too long pursued a "reactionary approach" that has weakened competitiveness and led to byzantine regulations. The Treasury chief, who earlier on Monday called on the Fed to review its operations to safeguard its monetary policy independence, said the Treasury would take a stronger role in driving reform efforts by regulators, including the Fed. "To that end, the department will break through policy inertia, settle turf battles, drive consensus, and motivate action to ensure no single regulator holds up reform," Bessent said of the Treasury. REDUCING CAPITAL REQUIREMENTS Banking regulators should consider abandoning the dual structure proposed in July 2023, but never enacted, that would have seen banks comply with the higher of two different methods of measuring their risk capital requirements. The proposal, which came after the high-profile failure of Silicon Valley Bank and other institutions in 2023, would have significantly increased the amount of capital banks needed to set aside for potential losses. It drew intense opposition from the industry. "This dual-requirement structure did not derive from a principled calibration methodology. It was motivated simply to reverse-engineer higher and higher capital aggregates," Bessent said. "It also was at odds with capital reform as a modernization project because it would have preserved the antiquated capital requirements as the binding floor for many, perhaps most, large banks." Bessent also called for regulatory capital relief not just for large banks but also at the smaller, community bank level. One solution, he said, would be to allow any bank not subject to modernized capital requirements a choice to opt in. "This would result in a meaningful reduction in capital for those banks," Bessent added. While he said Treasury would prioritize financial regulatory policy that puts American workers first and prioritizes growth, he said regulators needed to carry out statutory mandates for financial safety and stability and consumer protection. "Rationalizing and tailoring regulation does not have to amount to regulatory weakening," Bessent said.
Reuters
a day ago
- Business
- Reuters
Bessent calls for deeper US bank regulatory reforms, scrapping dual capital requirements
WASHINGTON, July 21 (Reuters) - U.S. Treasury Secretary Scott Bessent on Monday called for deeper reforms of what he called an antiquated financial regulatory system and said regulators should consider scrapping a "flawed," Biden-era proposal for a dual capital requirement structure for banks. Speaking at the start of a Federal Reserve regulatory conference, Bessent said excessive capitalization requirements were imposing unnecessary burdens on financial institutions, reducing lending, hurting growth and distorting markets by driving lending to the non-bank sector. "We need deeper reforms rooted in a long-term blueprint for innovation, financial stability, and resilient growth," Bessent said in prepared remarks. The Trump administration is pursuing a broad reform agenda aimed at cutting rules governing financial institutions, including capital requirements, arguing that such actions will boost economic growth and unleash innovation. Bessent said regulators have for too long pursued a "reactionary approach" that has weakened competitiveness and led to byzantine regulations. The Treasury chief, who earlier on Monday called on the Fed to review its operations to safeguard its monetary policy independence, said the Treasury would take a stronger role in driving reform efforts by regulators, including the Fed. "To that end, the department will break through policy inertia, settle turf battles, drive consensus, and motivate action to ensure no single regulator holds up reform," Bessent said of the Treasury. Banking regulators should consider abandoning the dual structure proposed in July 2023, but never enacted, that would have seen banks comply with the higher of two different methods of measuring their risk capital requirements. The proposal, which came after the high-profile failure of Silicon Valley Bank and other institutions in 2023, would have significantly increased the amount of capital banks needed to set aside for potential losses. It drew intense opposition from the industry. "This dual-requirement structure did not derive from a principled calibration methodology. It was motivated simply to reverse-engineer higher and higher capital aggregates," Bessent said. "It also was at odds with capital reform as a modernization project because it would have preserved the antiquated capital requirements as the binding floor for many, perhaps most, large banks." Bessent also called for regulatory capital relief not just for large banks but also at the smaller, community bank level. One solution, he said, would be to allow any bank not subject to modernized capital requirements a choice to opt in. "This would result in a meaningful reduction in capital for those banks," Bessent added. While he said Treasury would prioritize financial regulatory policy that puts American workers first and prioritizes growth, he said regulators needed to carry out statutory mandates for financial safety and stability and consumer protection. "Rationalizing and tailoring regulation does not have to amount to regulatory weakening," Bessent said.
Yahoo
a day ago
- Business
- Yahoo
Bessent calls for deeper US bank regulatory reforms, scrapping dual capital requirements
By David Lawder and Andrea Shalal WASHINGTON (Reuters) -U.S. Treasury Secretary Scott Bessent on Monday called for deeper reforms of what he called an antiquated financial regulatory system and said regulators should consider scrapping a "flawed," Biden-era proposal for a dual capital requirement structure for banks. Speaking at the start of a Federal Reserve regulatory conference, Bessent said excessive capitalization requirements were imposing unnecessary burdens on financial institutions, reducing lending, hurting growth and distorting markets by driving lending to the non-bank sector. "We need deeper reforms rooted in a long-term blueprint for innovation, financial stability, and resilient growth," Bessent said in prepared remarks. The Trump administration is pursuing a broad reform agenda aimed at cutting rules governing financial institutions, including capital requirements, arguing that such actions will boost economic growth and unleash innovation. Bessent said regulators have for too long pursued a "reactionary approach" that has weakened competitiveness and led to byzantine regulations. The Treasury chief, who earlier on Monday called on the Fed to review its operations to safeguard its monetary policy independence, said the Treasury would take a stronger role in driving reform efforts by regulators, including the Fed. "To that end, the department will break through policy inertia, settle turf battles, drive consensus, and motivate action to ensure no single regulator holds up reform," Bessent said of the Treasury. REDUCING CAPITAL REQUIREMENTS Banking regulators should consider abandoning the dual structure proposed in July 2023, but never enacted, that would have seen banks comply with the higher of two different methods of measuring their risk capital requirements. The proposal, which came after the high-profile failure of Silicon Valley Bank and other institutions in 2023, would have significantly increased the amount of capital banks needed to set aside for potential losses. It drew intense opposition from the industry. "This dual-requirement structure did not derive from a principled calibration methodology. It was motivated simply to reverse-engineer higher and higher capital aggregates," Bessent said. "It also was at odds with capital reform as a modernization project because it would have preserved the antiquated capital requirements as the binding floor for many, perhaps most, large banks." Bessent also called for regulatory capital relief not just for large banks but also at the smaller, community bank level. One solution, he said, would be to allow any bank not subject to modernized capital requirements a choice to opt in. "This would result in a meaningful reduction in capital for those banks," Bessent added. While he said Treasury would prioritize financial regulatory policy that puts American workers first and prioritizes growth, he said regulators needed to carry out statutory mandates for financial safety and stability and consumer protection. "Rationalizing and tailoring regulation does not have to amount to regulatory weakening," Bessent said.
Arab News
3 days ago
- Business
- Arab News
Saudi minister leads KSA delegation at G20 finance ministers and central bank governors in South Africa
KwaZulu-Natal: Saudi Finance Minister Mohammed Al-Jadaan recently led the Kingdom's delegation at the Third Meeting of the G20 Finance Ministers and Central Bank Governors in KwaZulu-Natal, South Africa. At the meeting, the Saudi minister highlighted the need to accelerate reforms of the international trading system, adding that longstanding issues now require urgent action, Saudi Press Agency reported on Sunday. 'It is important that we move forward with reforms that reflect today's evolving realities,' Al-Jadaan said. Saudi Central Bank Governor Ayman Al-Sayari was among the officials in attendance.
The Guardian
16-07-2025
- Business
- The Guardian
No more card surcharges: what the Reserve Bank's proposed changes mean for your wallet
That extra 10c on your morning coffee. That $2 surcharge on your taxi ride. The sneaky 1.5% fee when you pay by card at your local restaurant. These could all soon be history. The Reserve Bank of Australia (RBA) has proposed a sweeping reform: abolishing card payment surcharges. The central bank says it's in the public interest to scrap the system and estimates consumers could collectively save $1.2bn annually. But like all major financial reforms, the devil is in the detail. Surcharging was introduced more than two decades ago to expose the true cost of different payment methods. In the early 2000s, card fees were high, cash was king and surcharges helped nudge consumers towards lower-cost options. But fast-forward to 2025, and the payments ecosystem has changed dramatically. Cash now accounts for just 13% of in-person transactions, and the shift to contactless payments, accelerated by the pandemic, has made cards the default for most Australians. When there's no real alternative, a surcharge becomes less a useful price signal and more a penalty for convenience. After an eight-month review, the bank's Payments System Board has concluded the surcharge model no longer works in a predominantly cashless economy. The proposal now on the table is to phase out surcharges and instead push for simplified, all-inclusive pricing. At first glance, removing surcharges looks like a win for consumers. Every household could save about $60 per year, based on the RBA's estimates. But payment costs don't vanish – they shift. This is where the Reserve Bank's proposal is more sophisticated than it may appear. Alongside banning surcharges, it plans to lower interchange fees (the fees merchants pay to card networks such as Visa and Mastercard) and introduce caps on international card transactions. These changes aim to reduce the burden on merchants, which in turn limits the pressure to raise prices. Some worry that without surcharges, businesses will simply embed the costs into product prices. That's possible. However, the bank estimates this would result in only a 0.1 percentage point increase in consumer prices overall. There are three reasons for that: Most merchants already don't surcharge, especially small businesses. Of them, 90% may have included card costs in their pricing. Competition keeps pricing in check. Retailers in competitive markets can't raise prices without risking customers. Transparency is coming. The reforms will require payment providers to disclose fees more clearly, allowing merchants to compare and switch – fostering more competition and lower costs. That said, the effects won't be felt evenly. Merchants in sectors that do currently surcharge, including hospitality, transport and tourism, will need to rethink their pricing strategies. Some may absorb costs; others may pass them on. Consumers stand to benefit most. They'll avoid surprise fees at checkout, won't need to switch payment methods to dodge surcharges and won't have to report excessive fees to the Australian Consumer and Competition Commission. Combined with lower interchange fees, this means consumers should face less friction and more predictable pricing. About 90% of small businesses don't currently surcharge and would gain around $185m in net benefits. These businesses often pay higher interchange fees, so the reform will reduce their costs. New transparency requirements will also make it easier to find better deals from payment service providers (PSPs). Large businesses already receive lower domestic interchange rates, but they'll benefit from new caps on foreign-issued card transactions, which is a win for those in e-commerce and tourism. Banks that issue cards stand to lose about $900m in interchange revenue under the preferred reform package. Some may respond by raising cardholder fees or cutting rewards, especially on premium credit cards. But they may also gain from increased credit card use as surcharges disappear. The 10% of small and 12% of large merchants who currently surcharge will have to adjust. They may face retraining costs and need to revise their pricing strategies. Most will be able to adapt, but the transition won't be cost-free. Payment service providers will face about $25m in compliance costs to remove surcharges and provide clearer fee breakdowns. For some, this may involve significant system changes, though one-off in nature. The Reserve Bank's proposal tackles real problems: an outdated surcharge model, opaque pricing by payment service providers, and bundling of unrelated services into payment fees. Its success depends on how well these reforms are implemented and whether they deliver real price transparency and lower costs. Removing visible price signals may create cross-subsidisation, where users of low-cost debit cards subsidise those who use high-cost rewards credit cards. Some economists argue this could reduce overall efficiency in the system. International experience offers mixed lessons. While the European Union and United Kingdom banned most surcharges years ago, outcomes have varied depending on market conditions. Efficiency gains haven't always followed, and small business concerns persist. The Reserve Bank is seeking feedback until 26 August, with a final decision due by year-end. If adopted, the reform will be phased in, allowing time for businesses to adapt. For consumers, this may mark the end of hidden payment fees. But for the broader system, success will depend on more than just eliminating surcharges. It will require meaningful competition, transparency and vigilance during the transition. While not a major omission, mobile wallets (such as Apple Pay) and Buy Now, Pay Later (BNPL) services represent a missing component in the broader payments ecosystem that the current reforms do not yet address. These platforms operate outside the traditional regulatory framework, often imposing higher merchant fees and lacking the transparency applied to card networks. Their growing popularity, especially among younger consumers, means they increasingly shape payment behaviour and merchant cost structures. To build a truly future-ready and equitable payments system, these emerging models may need to be brought into the regulatory fold. Angel Zhong is a professor of finance at RMIT University This article was originally published in the Conversation
