A leading executive at JPMorgan Chase has cautioned that a proposed federal regulatory framework, known as Basel III Endgame, could negatively impact small businesses by limiting their access to credit and increasing the cost of borrowing.
Stevie Baron, CEO of Chase Business Bank, stated in a memo that while recent revisions to the 2023 proposal represent progress, further adjustments are necessary to prevent unintended consequences for Main Street. "The latest revisions to the 2023 proposal are a step in the right direction, but as we reiterated to regulators, more work is needed to ensure the final rules do not increase the cost of lending or reduce access to credit for small businesses," Baron said.
Baron specifically highlighted concerns about proposed changes to the Global Systemically Important Bank (GSIB) surcharge calculation. She argued that the current formula could incentivize trading activities over lending and lead to higher borrowing costs for a significant number of small business owners. JPMorgan Chase, as a GSIB, is subject to stricter capital requirements. "The Fed should reconsider the proposed changes to the GSIB surcharge calculation, and, in particular, retain the current approach to the short-term wholesale funding factor that accounts for the size and funding diversification benefits of universal banks," Baron urged. "Regulators should ensure the surcharge framework does not penalize the everyday lending and banking services relied on by small businesses."
She further contended that capital requirements should not automatically increase with economic growth or routine business expansion. Baron called for a coherent capital framework that avoids layering multiple requirements on the same risks. Baron oversees a portfolio of over 7 million small and medium-sized businesses, with average business banking loans totaling more than $19 billion in fiscal year 2025.
The Basel III regulatory package was developed by global regulators following the 2008 financial crisis to bolster bank capital and resilience. U.S. regulatory agencies, including the Federal Reserve, FDIC, and OCC, initially proposed the Basel III Endgame framework in 2023, but later withdrew it for revisions after facing opposition. A revised draft was put forth by regulators in March, with a comment period extending to July.
JPMorgan Chase CEO Jamie Dimon previously announced the bank's American Dream Initiative, aimed at expanding its support for small and medium-sized businesses. On "Fox & Friends" in March, Dimon outlined plans to grow the number of businesses served to 10 million and implement changes to foster U.S. economic growth. A JPMorgan Chase executive also noted that acting Labor Secretary Keith Sonderling recently visited the bank's headquarters to discuss the initiative and its alignment with the current administration's economic strategy.
Lawmakers have also voiced concerns about the potential effects of the proposed rules. Senate Banking Committee Chairman Tim Scott, R-South Carolina, stated in March that overly complex capital rules could impede economic growth without enhancing financial system safety. "The Biden administration’s plan would have made it harder to get a mortgage, harder to start a business, and more expensive to make ends meet. That is the wrong direction when families are already feeling squeezed," Scott said. "There is still more work to do. We need rules that keep our financial system strong while making sure banks can lend, and our economy can grow."
Baron's memo is part of a new series from JPMorgan Chase where senior executives share their perspectives on economic and political policies affecting the bank and the broader economy.