Group voices opposition to new bank rules.
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Small business owners in New Hampshire are voicing their opposition to a potential new banking regulation that they say will make it even more difficult for them to get loans to sustain and grow their businesses.
“It takes capital to make capital,” said Shira Nafshi, owner of the Trainers Loft in Tilton.
Nafshi was part of a group of Granite State small business owners who traveled to Washington, D.C., to meet with the state’s congressional delegation to weigh in with their concerns that a new banking regulation — called the Basel III Endgame — could limit their future access to credit at a time when they’re already challenged by economic conditions of inflation and higher interest rates.
“If Basel III Endgame goes through, it’s going to limit even further the possibility of us getting a loan if we need a loan, because right now we’re trying our hardest to not get one and that the reason why is because the interest rates are so high already,” said Danya Landis, who owns Machina Kitchen & ArtBar in Keene.
Landis and Nafshi were joined in the D.C. trip in November by two other local small business owners: Dina Akel, owner of Vieira Luxe in Nashua, and Toutou Marsden, owner of Dell-Lea Weddings & Events in Chichester.
What is B3E?
Basel III Endgame (B3E) is the term applied to new banking regulations proposed by the Federal Reserve and other financial regulators that update current rules as they apply to capital and risk. The plan will increase by 20% or more the amount of capital big banks are required to have on their balance sheets. These higher capital requirements, according to statements by Federal Reserve Chair Jerome Powell, could raise the cost of and reduce access to credit. The greater amount of on-hand capital, the Fed reasons, also mitigates risky behaviors that lead to bank failures.
The New Hampshire group on Nov. 14 met individually with U.S. Sen. Jeanne Shaheen, D-NH, U.S. Rep. Chris Pappas, D-CD1, U.S. Rep. Annie Kuster, D-CD2, and an aide for U.S. Sen. Maggie Hassan, who at the time of the visit was chairing a committee meeting.
The visit, which included other small business representatives from across the country, was organized by Goldman Sachs and its 10,000 Small Businesses Voices initiative, a 3-year-old small business advocacy program. It is a spin-off of 10,000 Small Businesses, an investment fund created by Goldman Sachs to help entrepreneurs create jobs and economic opportunity by providing a comprehensive business education program and access to capital and business support services.
To date, 10,000 small businesses has served more than 14,000 small businesses across the United States with training and access to capital, among them, Marsden’s Dell-Lea Weddings & Events.
“Affordable lending is critical to the success of American small businesses, because we use this capital to fund business operations and potential expansions,” said Marsden. “Banks already treat small businesses as risky borrowers, and we believe this proposal will make borrowing costs unaffordable and capital inaccessible. We are asking the lawmakers and the Federal Reserve to abandon this proposed regulation and instead partner with us to identify regulations that allow us to remain competitive and forward-leaning.”
In addition to meeting with legislators, the small business group also sent a letter to the Federal Reserve to express their concerns. “The proposed cumulative capital requirements for lending will make it more expensive for banks to loan to small businesses, and those added costs will no doubt be passed on to us,” their letter said in part.
It was signed by some 3,000 people nationwide, including 44 from New Hampshire.
Goldman Sachs’ CEO David Solomon, along with other bank CEOs that included JPMorgan’s Jamie Dimon, Bank of America’s Brian Moynihan and Jane Fraser of Citigroup, testified before the Senate Banking Committee Dec. 6 with the message that the new proposals would have a negative impact on the economy. They said B3E would curtail lending and weaken bank balance sheets at a time when the industry needs more flexibility.
Noting the recent lobbying efforts against B3E, the committee chair, Sen. Sherrod Brown, D-Ohio, said: “You should stop pouring money into lobbying against efforts to protect the taxpayers who subsidize your entire industry.”
But there is Capitol Hill opposition to the new regulations as characterized by comments from U.S. Sen. John Tester, D-Montana, who said he has “some concerns about the proposed changes, and what its impact will be on workers and households, small businesses, access to credit and the overall vibrancy of our capital markets.”
Landis’s Machina is a farm-to-table restaurant with a craft cocktail bar, venue and art gallery. She has an extensive background in event management and metal sculpture, and opened Machina on Court Street in Keene about five years ago.
As much as surviving during the COVID pandemic was a challenge, she said she is equally challenged, if not more so, now by rising costs.
“We’re considered a risky business in the hospitality industry,” said Landis, “and most people will say no to that hospitality industry in general. So that’s the fear with this Basel Endgame issue. They’re squeezing us for all we’re worth and limiting the amount of money that we can get for loans.”
The Trainers Loft is a tack shop, a store that sells equestrian supplies. What originally was mostly a consignment shop, Nafshi bought the business in 2018 and has been transitioning its offerings so that half is consignment goods and half is new goods.
“The point is to help small businesses succeed. If we can’t get the loans and the capital that we need when we need it, we have no hope of actually making it,” said Nafshi. “Anything that makes it even more difficult for a small business to get a loan in this economy is a terrible idea.”
Nafshi and Landis both said the New Hampshire group was heartened by the reception of the congressional delegation.
“All four of them met with us and were really, really interested in what we had to say,” said Nafshi. “They were all incredibly receptive.”
Added Landis: “My biggest takeaway with meeting with each one of them individually is that they genuinely cared, and they asked questions that were relevant and interesting.”
The Basel III Endgame comment period deadline was extended from Nov. 30 to Jan. 16, 2024. The regulatory agencies will collect data during the comment period to further refine the proposal’s impact. Without congressional intervention, large banks would start the transition to the new framework on July 1, 2025, with full compliance starting July 1, 2028.
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