Bank CEOs warn rate cap would have ‘unintended consequences’

• Key insight: Bank CEOs are expressing alarm about the potential impacts of President Trump’s call for a 10% limit on credit card interest rates.
• What’s at stake: Credit card interest rates are an important source of income for banks with large card portfolios. Enacting a cap would cut into banks’ earnings, analysts said.
• Forward look: Though Trump told banks to implement the rate reduction by Jan. 20, few think the demand will be met.

Brian Moynihan is usually very careful to avoid commenting on politics, particularly when it involves opposing President Trump. But when he was asked Wednesday about Trump’s proposed limit on credit card interest rates, the Bank of America CEO was uncharacteristically blunt.

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“If you bring the caps down, you’re going to constrict credit,” Moynihan said during BofA’s fourth-quarter earnings call. “We believe in affordability, but if you implement that cap, you will see unintended consequences.”

Moynihan is far from alone in raising alarm bells. After Trump proposed a 10%, one-year limit on credit card interest rates late last week, bank trade groups quickly spoke out against the idea.

But it’s one thing for industry groups to issue press releases, and another for prominent CEOs to speak out publicly. And this week, as lenders began to announce their fourth-quarter and full-year 2025 results, the top executives at some of America’s biggest banks voiced their opposition as well.

Citi CEO Jane Fraser said Wednesday that the proposed cap “is not something that we can support.”

“Just to be clear, the impact to us and other banks would just be dwarfed by the severe impact on access to credit and on consumer spending across the country,” Fraser said during Citi’s quarterly earnings call. “The studies in the U.S. have shown a vast majority of consumers and businesses will lose access to credit credits. They’d be forced to pursue more predatory alternatives, and you’d only be left with the wealthy having access to credit cards, and nobody wants that.”

Wells Fargo CEO Charlie Scharf was more cautious Wednesday in his response to the possibility of a rate cap.

“I think we all agree that the underlying issue of focusing on affordability … is a real issue,” Scharf said during Wells’ earnings call. “And so what the right response to that is, is something that we do think should be carefully considered. Relative to what all this means for us, it’s too early to know because we’re not quite sure what the ultimate action” will be.

Trump revived the idea of a rate cap, which he floated during the 2024 presidential campaign, last Friday on Truth Social, his social media service. He said the cap should take effect on Jan. 20 and last one year — ending in January 2027, not long after this year’s midterm elections.

“We will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more,” the president wrote.

Industry observers were quick to analyze the proposal, which would sharply reduce credit card interest rates. The average rate in the third quarter of 2025 was 21.39%, according to the Federal Reserve.

For banks with sizable card portfolios — such as JPMorganChase , Citi, Bank of America, Wells Fargo and U.S. Bancorp — there would be a significant earnings impact, analysts have said. In fact, a cap “could wipe out earnings from cards for a year,” Mike Mayo, an analyst at Wells Fargo Securities, estimated in a research note.

There’s a “very low chance” that the 10% cap would pass Congress, in part because “the move would hurt the Treasury’s goal to have banks lend more,” Mayo wrote. “To us, it would ruin card economics (eliminate most of card earnings today) and incentives would be to stop lending.”

Other analysts had similar reactions. Brian Foran, an analyst at Truist Securities, said in a research note that the proposed 10% interest rate cap “is not great, to put it mildly.”

“We estimate it would swing the business to unprofitable if enacted, with subprime credit cards hardest hit,” Foran wrote. “Given how severe it is, it is hard to imagine it moving forward.”

If enacted, a cap would likely pressure banks’ net interest income, loan growth and certain volume-related revenue, according to Mike Taiano, an analyst at Moody’s Ratings. In a recent research note, he said the “impact would vary considerably” based on banks’ specific business models, as well as their risk appetites and their concentrations in the credit card business.

“I think it’s pretty clear a 10% cap, when the average credit card rate is north of 20%, would have negative implications just from a profitability and business standpoint,” Taiano told American Banker in an interview.

The biggest impact would be on lenders offering “non-prime” rates, Taiano said.

Shares in Synchrony Financial, which relies more heavily on interest income than some other card issuers because of its concentration in store-branded cards, have fallen by around 11% since Friday. Shares in Bread Financial Holdings, another issuer that’s focused on the store-branded card market, have declined by roughly 14%.

Meanwhile, the larger banks, which can offer lower rates and have more diversified business models, would likely take a smaller hit, according to Taiano.

But the big banks could still face headaches, Taiano said — particularly from the one-year time limit Trump proposed.

“If it’s a permanent cap, you just say, ‘Look, we can’t, we can’t retain this customer, they’re not going to be profitable at a 10% [annual percentage rate],'” Taiano said.

“But if it’s a year, what do you do? Do you say, ‘Well, I don’t want to entirely disengage with this customer, because they’re actually profitable if rates are what they are today’?”

The big banks would take hits of varying sizes under Trump’s proposal, depending on factors such as the percentage of customers who pay their bills in full each month and the size of their credit card businesses.

At the end of last year’s third quarter, credit card loans represented 23.3% of total loans at Citi, 8.8% of total loans at BofA and 6.0% of total loans at Wells, according to analysts at J.P. Morgan Securities.

On the bright side, from the banks’ perspective, Taiano said he does not believe the measure is likely to be enacted.

“The legal path to implementation and enforcement … is unclear and may be difficult to achieve,” Taiano wrote in his note.

JPMorganChase, the nation’s largest bank by assets, has one of the largest credit card portfolios in the industry. On Tuesday, its chief financial officer, Jeremy Barnum, said the cap would be “bad for us,” as well as for consumers and the U.S. economy in general.

“People will lose access to credit on a very, very extensive and broad basis, especially the people who need it the most,” Barnum told analysts during the bank’s earnings call. “And so that’s a pretty severely negative consequence for consumers and, frankly, probably also a negative consequence for the economy as a whole right now.”