The opening day of the American Bankers Association (ABA) annual convention in Chicago featured a number of high-profile speakers, from Chicago Cubs owner and Incapital LLC Chairman Tom Ricketts to former CIA Director Gen. Michael Hayden and Geena Davis, actress and founder of the Geena Davis Institute on Gender in Media.
Maybe the most watched speaker, though, was the director of the National Economic Council (NEC), Gary Cohn. Cohn, the former president and chief operating officer at Goldman Sachs, joined ABA President and CEO Rob Nichols on stage to discuss banking and the economy.
Cohn revealed a host of interesting information, including that he believes there is “some real agreement on raising levels” of asset thresholds for designating banks as systemically important financial institutions.
That level currently is at $50 billion. Cohn said there appears to be broad consensus to move that up to at least $200 billion. He said the number starts with a two and the debate is over the two numbers after that, saying he could tell the audience what institutions would be involved in that debate, but that the audience could probably figure it out.
According to the Federal Reserve, as of March 31, six banks held between $200 billion and $300 billion in assets, the seventh through 12th largest banks by asset size in the U.S.: Bank of New York Mellon ($281 billion), Capital One ($280 billion), TD Bank Group ($268 billion), State Street Corp. ($235 billion), BB&T Corp. ($215 billion) and SunTrust Bank ($202 billion).
There are 23 banks with between $50 billion and $200 billion in assets as of March 31 that would be exempted from the expanded oversight if the asset threshold was raise. That includes Goldman Sachs, which has $151 billion in assets.
However, both Cohn and Nichols said the ultimate goal is to eliminate asset thresholds altogether and move to a risk-based assessment. Cohn said that was the message he took to weekend meetings with global financial leaders, and if it makes sense for the rest of the world, it should make sense in the U.S. as well.
The NEC director also discussed tax reform, saying the plan is critical to President Donald Trump and that the president would push for progress to be done this year. Later in the day, President Trump conducted an impromptu press conference with Senate Majority Leader Mitch McConnell, expressing his urgency in getting tax reform passed.
Cohn said reforming taxes and financial regulations were large parts of the administration’s plans to spur economic growth.
“Put the banks back in the center of our economy, which is where they should be,” he said.
Cohn said the work on reforming the regulatory structure – swinging the pendulum back after it went too far, as he put it – is key.
“Regulatory reform is allowing banks to take deposits and make loans the way they think they should do it, not the way the government thinks they should,” Cohn said, to applause from ABA attendees.
Cohn also said that the administration is vetting a candidate for the open community banker position on the Federal Reserve board. President Barack Obama nominated a candidate for that position but never got him confirmed, so that position has sat open in recent years. Cohn also said the recent confirmation of Randal Quarles to the Federal Reserve’s vice chairman for supervision slot would be another boost in helping regulatory reform for the banking industry.
He also added that the Financial Stability Oversight Council has “very quietly” done some significant things, including the recent decision to rescind the designation of AIG.
Finally, he said his attention also remains on cyber and data security.
“Cyber is where I always thought the next war was, for big business and small business,” he said.