Fed’s Basel climbdown leaves foot on rules ladder
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jonathan Guilford
NEW YORK, Sept 10 (Reuters Breakingviews) -The U.S. banking industry’s worst nightmares have been allayed, but its wildest dreams remain out of reach for now. On Tuesday Michael Barr, the Federal Reserve’s top regulator, substantially softened proposed rules that would tighten capital requirements for the United States' biggest lenders. It’s a reasonable change that addresses many real pain points, but still codifies some thorny philosophical shifts.
The Fed, along with its fellow watchdogs, has been pushing new rules known as the “Basel Endgame” for over a year. It’s a U.S. interpretation of global regulations agreed in the Swiss city and designed to complete the overhaul that began after the global financial crisis of 2008.
Yet bank executives and their lobbyists argued furiously that the Fed was being too harsh. If implemented as originally designed, the largest U.S. institutions known as global systemically important banks, or GSIBs, would have seen their required capital buffer expand by 19%.
This is a huge rise. The eight U.S. GSIBs together had just shy of $1 trillion in common equity Tier 1 capital at the end of June. Though banks generally hold more equity than the required minimum, increasing the collective buffer by one percentage point would therefore roughly require them to retain an extra $10 billion of equity. Barr’s announcement that the rejigged rules for GSIBs like JPMorgan JPM.N and Bank of America BAC.N would increase their combined capital by just 9% therefore amounts to a roughly $100 billion saving.
Even this obscures the scope of the change. Barr promised tweaks to ease the burden posed by a new measure of operational risk which tries to capture the threat posed to banks’ financial stability by, say, cybersecurity breaches or human error. This measure, which effectively was set to scale with bank size, would have fallen hard on institutions like Morgan Stanley MS.N that prize steady, fee-generating businesses.
Barr also backed away from other industry concerns which drove a frenzied opposition campaign. The Fed has nixed a proposal to penalize dealing with certain non-publicly traded companies; it softened risk calculations involving residential real estate and it fine-tuned the treatment of smaller banks to focus on unrealized losses.
Nonetheless, the philosophical changes embedded in items like operational risk charges remain in place, despite being questioned by members of the Fed’s own board of governors. And the likes of JPMorgan will probably still chafe at the idea of facing higher capital requirements even when regulators insist major lenders are resilient. There’s still a long way to go, and Barr was at pains to say everything is still on the table. For now, though, his climbdown is far from total.
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CONTEXT NEWS
Michael Barr, vice chair of supervision for the U.S. Federal Reserve, on Sept. 10 announced a set of changes to proposed new banking capital rules commonly known as the Basel endgame.
In a speech at the Brookings Institution, Barr announced that forthcoming revisions would lead to common equity tier 1 capital requirements for the largest U.S. banks increasing by around 9%, from 19% previously.
In addition, the risk-weighting for loans secured by residential real estate will be lowered, the treatment of fee income will be normalized with other forms of revenue when calculating operational risk, and calculations of credit risk with certain non-publicly traded firms will be changed.
Editing by Peter Thal Larsen and Sharon Lam
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إخلاء المسؤولية: تتيح كيانات XM Group خدمة تنفيذية فقط والدخول إلى منصة تداولنا عبر الإنترنت، مما يسمح للشخص بمشاهدة و/أو استخدام المحتوى المتاح على موقع الويب أو عن طريقه، وهذا المحتوى لا يراد به التغيير أو التوسع عن ذلك. يخضع هذا الدخول والاستخدام دائماً لما يلي: (1) الشروط والأحكام؛ (2) تحذيرات المخاطر؛ (3) إخلاء المسؤولية الكامل. لذلك يُقدم هذا المحتوى على أنه ليس أكثر من معلومات عامة. تحديداً، يرجى الانتباه إلى أن المحتوى المتاح على منصة تداولنا عبر الإنترنت ليس طلباً أو عرضاً لدخول أي معاملات في الأسواق المالية. التداول في أي سوق مالي به مخاطرة عالية برأس مالك.
جميع المواد المنشورة على منصة تداولنا مخصصة للأغراض التعليمية/المعلوماتية فقط ولا تحتوي - ولا ينبغي اعتبار أنها تحتوي - على نصائح أو توصيات مالية أو ضريبية أو تجارية، أو سجلاً لأسعار تداولنا، أو عرضاً أو طلباً لأي معاملة في أي صكوك مالية أو عروض ترويجية مالية لا داعي لها.
أي محتوى تابع للغير بالإضافة إلى المحتوى الذي أعدته XM، مثل الآراء، والأخبار، والأبحاث، والتحليلات والأسعار وغيرها من المعلومات أو روابط مواقع تابعة للغير وواردة في هذا الموقع تُقدم لك "كما هي"، كتعليق عام على السوق ولا تعتبر نصيحة استثمارية. يجب ألا يُفسر أي محتوى على أنه بحث استثماري، وأن تلاحظ وتقبل أن المحتوى غير مُعدٍ وفقاً للمتطلبات القانونية المصممة لتعزيز استقلالية البحث الاستثماري، وبالتالي، فهو بمثابة تواصل تسويقي بموجب القوانين واللوائح ذات الصلة. فضلاً تأكد من أنك قد قرأت وفهمت الإخطار بالبحوث الاستثمارية غير المستقلة والتحذير من مخاطر المعلومات السابقة، والذي يمكنك الاطلاع عليه هنا.
