Regional banks will benefit more than smaller financial institutions from a proposed increase in capital requirements at the largest banks, according to the Q3 2023 survey of bank executives from financial services firm IntraFi.
Thirty-nine percent said regional and super-regionals will benefit most from the proposed increase. Slightly more than the 37 percent who expect community banks to benefit the most. Nineteen percent said fintechs would reap the most benefits, according to the survey of bank CEOs, presidents, CFOs and chief operating officers from 597 banks.
Regulators proposed increasing U.S. bank capital requirements by up to 20 percent to strengthen the financial system following bank failures earlier this year. Federal Reserve Gov. Michelle Bowman has called the proposed hike a threat to the stability of the financial system by potentially pushing more banking services to nonbanks, causing a drop in the availability of credit and other financial services.
Executives expect the Federal Reserve to continue tightening monetary policy. Three-fourths said the Federal Open Market Committee will raise interest rates by another 25 basis points by year-end. They don’t expect the FOMC to begin cutting rates until the second half of next year. Thirty-one percent said the Fed will begin cutting rates in the third quarter of next year, followed by 29 percent who expect the first cut will come in the fourth quarter of 2024. Twenty-two percent expect the first cut will not come until at least 2025.
Thirty-nine percent of executives said demand decreased from a year ago as the FOMC raised interest rates to between 5.25 and 5.50 percent in the last 12 months to battle inflation. Thirty-five percent reported an increase. Seventy-two percent expect loan demand to either fall or be unchanged over the next 12 months.
Seventy-one percent reported that funding costs had increased over the last 12 months. Seventy-three percent said their banks’ access to capital was unchanged from 12 months ago, compared to 17 percent who saw less access. Seventy-two percent expect their access to be unchanged 12 months from now.
Economic sentiments were mixed. An even 43-43 percent split said conditions had either stayed the same or worsened over the last 12 months. Nearly half expect conditions to worsen in the next 12 months, with only 37 percent expecting the economy will stay the same.
Other report findings included:
- Nearly three quarters of executives are not interested in an acquisition in the next 12 months, followed by 24 percent who will look to acquire another bank. Only four percent will look to be acquired.
- Eighty-four percent kept overdraft fees unchanged since the start of the year even as the average cost of consumer overdrafts fell 11 percent.