U.S. bank executives warned that looming higher-capital requirements would raise prices for financial products and push activity into less regulated sectors as regulators weigh new rules to cushion against any potential losses, Reuters reported. Federal banking regulators are expected to introduce proposals in the coming weeks requiring banks to keep more cash on hand to ensure the financial system remains stable. Federal Reserve Vice Chair for Supervision Michael Barr said this month that large firms need to hold more in reserve to guard against unknown risks. While detailed plans have not been announced, bank executives are already sounding warnings about the potential drawbacks. "Higher capital requirements definitely increase the cost of credit, which is bad for the economy," Jeremy Barnum, JPMorgan Chase's chief financial officer, said on a conference call on Friday after the bank reported its second quarter earnings. The nation's largest lender may increase prices or abandon some products as a way to offset the higher capital costs, Barnum said. One key new expected rule would require banks to hold more capital against certain trades. JPMorgan officials also told investors that the bank would likely have to drop a derivatives product tied to the U.S. Treasury yield curve as a result, since it would no longer be economical. (Subscription required.)
