Wall Street Banks Clash Over Capital Rule Changes
Major Wall Street banks are clashing as the U.S. Federal Reserve nears completion of a capital rule overhaul, with disagreements emerging over how to treat short-term wholesale funding in calculating surcharges for global systemically important banks (GSIBs). JPMorgan Chase and Bank of America argue that proposed changes would unfairly benefit Goldman Sachs and Morgan Stanley by reducing their capital requirements more significantly. The dispute centers on the Fed's plan to make the capital surcharge more sensitive to risk, particularly regarding short-term funding sources like repo markets. JPMorgan estimates it could miss out on $13 billion in additional capital relief due to these changes, while Bank of America would lose about $9 billion. In contrast, Goldman Sachs and Morgan Stanley are expected to gain between $1 billion and $2 billion each under the new rules. The disagreement has intensified as banks seek to maximize their benefits before potential regulatory shifts following a possible Democratic takeover in Congress. The Fed's decision could influence lending activity and shareholder returns for these major financial institutions, with JPMorgan warning that the proposed changes might encourage trading over small business lending.
Topics: banking regulation federal reserve policy systemically important banks (GSIBs) Wall Street competition