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Sean Oblack
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TCH releases new empirical research quantifying significant offsetting costs targeted specifically at large banks 

Washington, D.C. – Following the release of the Government Accountability Office’s congressional testimony which summarizes its highly anticipated study examining cost of funds for large banks and concludes that any advantage large banks receive due to perceptions they are ‘too big to fail’ (TBTF) has been significantly reduced or reversed, Paul Saltzman, President of The Clearing House Association (TCH), released the following statement:

 “At first glance, the GAO appears to confirm what we and others who have carefully considered this issue already knew -- cost of funding differences among banks of different sizes have significantly declined or been reversed, suggesting that TBTF perceptions have substantially diminished.  This should come as no surprise, as it simply reflects existing law which specifically prohibits taxpayer bailouts, as well as the progress we've made in implementing a sustainable regulatory framework that both reduces the likelihood of large bank failures and any systemic impact if they do occur. We now have the tools to effectively resolve any bank regardless of size or complexity without taxpayer support. As a result, market participants are factoring these developments into their assessment of bank credit risk.”

 Of the GAO’s 42 different methodologies from independent sources, over 70% of them demonstrated that large banks had higher funding costs in recent years. The GAO also acknowledged that any evaluation must also consider offsetting regulatory costs targeted at the largest banks.  

 “The GAO is exactly right on this point – to accurately assess the competitive impact of government policies on the funding cost of large banks, we have to examine the net effect of all the additional regulatory requirements targeted at large banks,” Saltzman continued.  “Bank critics can’t ignore the substantial – though often appropriate – cost of additional regulations and responsibilities imposed on large banks when evaluating the cost of funds. 

 TCH, responding to this acknowledgement, has conducted extensive empirical research to quantify several of the most obvious offsetting regulatory costs.  The study found that, at a minimum, these unique regulations cost large banks between $27 - $45 billion annually, more than offsetting any perceived funding cost advantage.

 As a key participant in this debate, TCH has provided extensive, empirically-supported research reports, data studies and working papers (which can be found here) that highlight the key issues and correct misperceptions. Large banks provide a unique set of services on which businesses, consumers and our economy depend and are vital to the continued spread of innovation. As large banks provide services that are global in scale and scope, they are uniquely positioned to meet the critical needs of a dynamic global marketplace.

About the Clearing House Established in 1853, The Clearing House is the oldest banking association and payments company in the United States.  It is owned by the world’s largest commercial banks, which hold more than half of all U.S. deposits.  The Clearing House Association L.L.C. is a nonpartisan advocacy organization representing – through regulatory comment letters, amicus briefs and white papers – the interests of its owner banks on a variety of important banking issues.  Its affiliate, The Clearing House Payments Company L.L.C., provides payment, clearing and settlement services to its member banks and other financial institutions, clearing almost $2 trillion daily which represents nearly half of the automated clearing-house, funds transfer, and check-image payments made in the United States.  See The Clearing House’s web page at www.theclearinghouse.org.