NBC News’ senior business correspondent Christine Romans interviewed Citigroup Chair John Dugan at FIA’s International Futures Industry Conference in Boca Raton on 11 March. Dugan shared his view on the impact of economic uncertainty, the current regulatory environment for banks and capital requirements.
A cautious business environment
In line with most discussions at Boca, Romans asked Dugan about the impact of the Trump administration. Dugan suggested the euphoria driving the animal spirits in the markets following the November 2024 US presidential election had given way to “a significant amount of uncertainty as a result of the tariff announcements.”
And he noted “the business climate has become much more cautious about where they're going.” Dugan cited lower appetites for mergers and acquisitions and uncertainty about trade policy.
“I think people have underestimated how serious the president appears to be about imposing tariffs. But what does that actually mean in practice? We're all still waiting to see. Until that happens, there's been a pullback because of the uncertainty. Once that clears, I think markets will be open and we'll be ready.”
In replying to a question about the Trump administration aiming for a new protectionist era for the United States, Dugan suggested the policies may significantly impact global trade and the trade corridors. At the same time, the policies will not bring back a world devoid of trade between nations.
The challenging politics of bank regulatory reform
Pivoting to the financial regulatory environment, Dugan, the former Comptroller of the Currency from 2005-2010, suggested the US finds itself at an inflection point.
“Post financial crisis, there was a natural swinging of the pendulum to have a lot more regulation of banks and the banking system. And that was a never-ending series of things happening. It’s understandable, but in my view, it's gone too far.”
“I think people have realized that the pendulum needs to come back more towards a centre and a more sensible place without overdoing it. We need to get this balance right between regulation and supporting the economy. I don't think we're in quite the right place now, but I think we'll be going down that path.”
Referencing the failure of Silicon Valley Bank, Dugan said, “Silicon Valley Bank was bad for Silicon Valley Bank. It actually showed that the larger banks like Citi and our competitors fared very well because they were much stronger, much more resilient.”
When Romans asked about the practicalities of the current bank regulatory regime in the US, Dugan shared his unique perspective having led one of the bank regulators and now serving as chair of one of the largest banks.
“People have been talking about consolidating our crazy, three-to-four regulator system that we've had for many years. We used to say it doesn't work in theory, but it does work in practice. And I'm not sure that's true anymore. There's a lot of redundancy in the system.”
While the former comptroller of the currency noted how the new administration wanted to make progress on this, many have trod the path to change before.
“I must tell you, having worked on these sorts of issues for all my whole career, the politics is terrible. The stakeholders want to protect the particular regulators they have. You saw a reflection of that last week when Secretary Bessent announced that they weren't going to propose consolidating the regulators.”
When Romans asked Dugan about his dream regulatory environment, he offered a balanced approach.
“You need strong banks to power the economy, and it is really important to have a credible regulatory system. On the other hand, you can overdo it. I'd like to see very strong institutions that have a reasonable level of capital commensurate with the risk and are able to provide the funding to old and new parts of the economy as they move forward. We have a lot of good things in our system to build on, but it does need to be recalibrated.”
Burdensome capital levels giving way to private credit markets
In discussing capital levels, Dugan suggested the Dodd-Frank financial reforms – broadly speaking – worked well. But today’s capital requirements have limited banks’ ability to fully support their clients.
“If you put too much capital and too many capital requirements on banks, they do less and less of what they're supposed to do in providing credit. And that's a real thing. It has caused the creation of the private credit markets. We can't support our clients at times in the ways we would like to. We need more balance around capital requirements that ensure we have what's needed, but let's be rigorous about that analysis and allow banks to support their clients in a meaningful way.”
Where banks hold capital to manage periods of economic volatility and loan defaults, private credit markets have not experienced such a time.
“We've never run through a crisis where we had a downdraft of people defaulting on loans while we've had this big entrance in the private credit markets. We don't know whether they will know how to handle themselves in a restructuring of credit on a wide scale in the way banks have to. That's a real issue going forward.”
