US banks: the authorities will require large increases in the capitalization of small and medium-sized banks
US regulators are preparing to force big banks to beef up their financial strength, to help bolster the system's resilience after a string of mid-sized bank failures this year.
The changes, which regulators are set to propose as early as this month, could raise overall capital requirements by about 20% for the largest banks on average, according to The Wall Street Journal , citing people familiar with the plans. .
According to the Journal, banks with assets of at least $100 billion could be required to meet new requirements, higher than the current ones, but lower than the $250 billion threshold, for which regulators have reserved the strictest rules .
Banks that are heavily dependent on fee income, such as those from investment banking or wealth management, may also face large capital increases.
In May, Fed Vice Chair for Supervision Michael Barr signaled to House lawmakers that he believes capital requirements should be higher.
"The banking system may need additional capital to be more resilient, precisely because we don't know the nature of the types of shocks that could hit the system, as happened with recent bank failures."
Barr said earlier that US officials are reviewing banks' capital requirements and are committed to implementing requirements that align with Basel III.
Bloomberg reports that the largest banks have argued that their stability during the recent turmoil has proven their strength and that they already have more than enough capital and are therefore opting out of tightening requirements. The six largest US companies have added more than $200 billion to their capital buffers over the past decade, and JPMorgan said last month that its total loss-absorbing capacity now exceeds the loan losses all US banks have. had during the financial crisis.
"Higher capital requirements are not justified," said Kevin Fromer, chief executive officer of the Financial Services Forum, which represents the largest US banks.
"Additional requirements would mostly serve to burden businesses and borrowers, hampering the economy at the wrong time."
JPMorgan CEO Jamie Dimon was among the critics who slammed the rise in capital requirements last year, calling the impending hike “bad for America” before a pair of congressional hearings .
The forthcoming proposal is the latest piece of capital rules that world policymakers agreed to implement after the 2007-2009 financial crisis. The overhaul forced banks around the world to boost their capital cushions in hopes of making them better prepared to weather crises without taxpayer bailouts.
Nathan Dean, senior government analyst at Bloomberg, noted that:
“The last remaining piece of Basel III, known informally as the Basel III “endgame,” would change US bank capital levels as regulators recalibrate asset risk weightings and limit the internal models used to calculate both credit and operational risk.
All three agencies (Fed, OCC and FDIC) are expected to seek comments on the proposed capital rules. They will then have to vote again to complete the changes, which are likely to be implemented in the next few years.
However, JPMorgan said on investor day that while the final parts of the Basel III capital rules — which some investors have called Basel IV because they could be so far-reaching — could be proposed soon, they are unlikely to be implemented. before the beginning of 2025.
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The article US banks: the authorities will require large increases in the capitalization of small and medium-sized banks comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/banche-usa-le-autorita-richiederanno-forti-incrementi-della-capitalizzazione-delle-banche-piccole-e-medie/ on Tue, 06 Jun 2023 06:00:07 +0000.