(Reuters) -U.S. bank regulators' proposed new capital requirements for large banks, if finalized, would violate key federal laws and needlessly impose burdensome costs on 80% of assets in the country's banking system, major industry lobby groups said on Friday.
As a result, the proposal issued in July by the U.S. Federal Reserve and two other agencies should be entirely scrapped and re-issued, according to a comment letter from the Bank Policy Institute and Financial Services Forum, trade groups representing giants like JPMorgan Chase & Co (NYSE:JPM) and Bank of America.
Two others, the Securities Industry and Financial Markets Association, and the U.S. Chamber of Commerce, also signed the letter.
The banking industry has mounted vociferous opposition to the proposal, which would be among the last in a series of reforms made in response to the global financial crisis of more than 15 years ago.
Michael Barr, the central bank's vice chair for supervision and a key architect of the proposal, has defended the initiative in recent months, saying its effect on borrowing costs would be limited, but has signaled that officials are taking public reaction into account. The deadline for comments is Tuesday.
According to Friday's letter, the proposal would cause a "complete overhaul" of how the risk inherent in bank assets is calculated, boosting banks' regulatory costs. At the same time, its purported benefits are not quantified, it said.
The letter said a key statute controlling how regulations are written requires the proposal's drafters to weigh its costs and benefits using evidence, which it claims they have not sufficiently done.
As a result, the proposal's defects "can only be cured through proposal of a new rule," the letter said.
Spokespersons for the Fed, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency declined to comment.