Fink Says New U.S. Limits on Bank Leverage May Go Too Far

BlackRock CEO Laurence D. Fink
BlackRock Inc. Chief Executive Officer Laurence D. Fink. Photographer: Lam Yik Fei/Bloomberg

Dec. 12 (Bloomberg) -- BlackRock Inc. Chief Executive Officer Laurence D. Fink said limits on risk-taking by banks may go too far and undermine efforts by the Federal Reserve to boost the economy.

“I am alarmed right now it may have unintended consequences,” Fink said today during a webcast organized by BlackRock. “There’s a possibility we’re going to be going too far with leverage ratios.”

U.S. regulators released their plans this week for implementing limits on speculative trading by banks under the Volcker rule, named for former Federal Reserve Chairman Paul Volcker. That followed rules proposed earlier this year that would force banks to hold more capital against assets they consider low risk.

Fink, whose firm oversees assets of $4.1 trillion, said he is worried that the new restrictions on banks will reduce liquidity in markets, affecting interest rates on Treasuries and mortgages. He estimated that mortgage rates for a typical borrower might rise to about 5.25 percent from 4.5 percent, without specifying a time frame.

Limits on leverage may also reduce bank lending and create a drag on the economy, he said.

“If we don’t have other entities who are filling the void of lending we could have a destabilized economy,” Fink said.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net