Why banks and consumer groups have become unlikely allies

• Banks are not alone in pushing against a regulatory package known as Basel III.
• The regulation would require that banks hold more capital, which could curb growth, lenders say.

Proposed regulation requiring US lenders to hold more capital is facing pushback from industries that would typically applaud tougher bank rules.

In a rare show of solidarity with the financial industry, consumer groups are arguing for the dismissal of the Basel III rule proposal over concerns that it will lead to sector-wide consequences.

Banks have disapproved of the rule on the premise that it curbs their ability to invest, and may require higher lending costs that would hurt clients who borrow from the bank.

JPMorgan chief Jamie Dimon previously noted that this would dampen economic expansion, as banks may pull back on new lending.

Housing-focused trade groups have expanded that argument, warning in a joint letter that reduced credit availability could undermine growth, and restrict mortgage loans to underserved borrowers.

Separate groups that rely on bank investments have also called for the proposal's revision.

The National Association of Manufacturers expressed worry that tighter requirements would mean less capital availability to virtually every industrial sector, especially smaller manufacturers that have few options for financing.

Meanwhile, the American Council on Renewable Energy and the Solar Energy Industries Association warned that tighter capital requirements would make it expensive for banks to finance green energy projects through tax equity incentives, slowing the clean energy transition.

Even legislators took part in the dissent, including among regulators themselves.

"I do have concerns that an over-calibrated capital charge, for operational risks in particular, would likely result in those costs being passed through to the people and businesses that rely on the financial products and services to continue the operation of their businesses," Fed Governor Michelle Bowman said in mid-January.