Big Banks Win as Fed Reduces Planned Reserves Hike to 9%
- Federal Reserve backs down from plan to increase big bank capital requirements
- Big banks now required to increase reserves by 9% instead of 20%
- Smaller banks exempt from most new rules
- Additional charge for largest banks based on size and systemic importance will be recalibrated
- Fed’s Michael Barr acknowledges ‘broad and material changes’ to proposals
- Public comment period extended
- Banking industry lobbying efforts successful in reducing requirements
The Federal Reserve has retreated from its plan to increase the capital reserves that America’s largest banks must hold against potential losses, reducing the proposed hike from an estimated 20% to just 9%. Michael Barr, Vice Chair at the Federal Reserve, stated in prepared remarks that ‘broad and material changes to the proposals are warranted’. The banking industry has been lobbying heavily against the new capital rules for over a year, arguing that they would make it harder to extend credit to customers and that there was insufficient evidence proving their effectiveness. Smaller banks with assets below $250 billion will be exempt from most of the new rules, while additional charges for the largest banks based on their size and systemic importance will be recalibrated. The Fed has extended the public comment period for these proposals, which emerged in 2023 as a response to the 2007-09 financial crisis.
Factuality Level: 8
Factuality Justification: The article provides accurate information about the Federal Reserve’s plan to increase reserves held by big banks against losses and includes relevant details such as the initial proposal of a 20% increase, the exclusion of smaller banks from most of the new capital rules, and the banking industry’s pushback. It also mentions the context of the financial crisis and the arguments made by bank executives. However, it lacks some technical details about the specific changes in the proposals and could provide more information on the reasons behind the decision.
Noise Level: 3
Noise Justification: The article provides a clear and concise summary of the Federal Reserve’s decision to adjust its capital requirements for big banks, with relevant information about the change in percentage and the reasons behind it. It also mentions the banking industry’s pushback against the initial proposal and the potential impact on smaller banks. However, it could benefit from more analysis or context on how this decision may affect the overall stability of the financial system and the economy.
Public Companies: JPMorgan Chase (JPM)
Key People: Michael Barr (Vice Chair at the Federal Reserve), Jamie Dimon (CEO of JPMorgan Chase)
Financial Relevance: Yes
Financial Markets Impacted: Big banks in the US
Financial Rating Justification: The article discusses the Federal Reserve’s plan to require big banks to increase reserves they hold against losses, which impacts financial markets and companies by potentially affecting their capital requirements and resilience. The banking industry has been pushing back against these changes, and the final decision will have an impact on the financial sector.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no extreme event mentioned in the article.
Move Size: No market move size mentioned.
Sector: Finance
Direction: Down
Magnitude: Large
Affected Instruments: Stocks
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