Banks are betting on their ability to overcome price restrictions

The largest U.S. banks showed no sign of giving in to President Donald Trump’s mandate to cut credit card interest rates, setting up a standoff just as the president is expected to take the world stage next week in Davos.

Executives in JPMorgan Chase and Citigroup Banks warned this week that instead of offering cards at a 10% interest rate, as Trump ordered to happen by January 20, banks would simply close the accounts of many customers.

“An interest rate cap is not something we support or can support,” Citigroup Chief Financial Officer Mark Mason told reporters on Wednesday.

He added that this “will restrict access to credit for those who need it most and will frankly have a detrimental impact on the economy.”

On Tuesday, Jeremy Barnum, JPMorgan’s chief financial officer, indicated that the industry could defend itself in the courts if necessary, saying “everything is on the table” in terms of a response.

Trump, eager to address voters’ concerns about affordability ahead of this year’s midterm elections, began his attack against banks in a social media post late Friday by claiming the industry was stealing from credit card borrowers. In media interviews and follow-up posts, Trump redoubled his efforts and supported a separate bill targeting swipe fees paid by merchants.

But five days after the original threat, bankers and their lobbyists told CNBC they had yet to receive any formal or written guidance from the Trump administration on the policy.

That gives some of them hope that the administration is not serious about pursuing interest rate caps, according to industry insiders, who requested anonymity to speak frankly.

While Trump has said banks that don’t adhere to the rates would be “breaking the law,” there is currently no U.S. law capping card rates. A bill introduced last year that would set interest rates at 10% for five years has stalled in Congress.

“We are complying with the law now,” said one person familiar with the operations of one large card issuer.

Barring legislation, which is unlikely, the industry will either evade the caps entirely or be forced to make concessions, similar to how Trump handled the drug industry, Wolf Research analysts led by Tobin Marcus said Tuesday in a note.

“We still view drug makers as a case study in how these types of deals can continue to be under threat,” Marcus said. “In this case, Trump had enough leverage to secure some new pricing commitments, but not enough to extract really painful commitments.”

The financial sector is focused heavily on two upcoming events to get a sense of how the credit card battle will evolve, sources told CNBC.

The first is Senate meetings this month where bills in the works could see the addition of Trump’s interest rate cap or push to cap interchange fees. But that path is ambiguous, because many Republicans, including House Speaker Mike Johnson, have already indicated they will not support rate caps on credit cards.

The other looming date is next Wednesday, the day after Trump’s January 20 deadline. That’s when Trump addresses leaders from the corporate and political worlds at the annual World Economic Forum in Davos, Switzerland. US Treasury Secretary Scott Besent and executives including JPMorgan’s Jamie Dimon are also scheduled to attend the meeting.

At the Davos conference last year, Trump stunned Bank of America CEO Brian Moynihan by accusing him and Damon of discriminating against conservatives when it came to access to bank accounts.