President Barack Obama’s proposal to limit the size of the nation’s largest banks could ultimately be a boon to one area of the financial sector: regional banks. Those banks that stuck to their traditional business models throughout the crisis are already demonstrating their health through strong earnings.
The push for financial regulation is in full force. Obama wants to limit the limit the scope of a large financial institutions ability to take risks, and prohibit commercial banks from trading for their own accounts, a practice that’s known as proprietary trading. Also being considered are size limits for certain banks.
The White House intends to work closely with the House and Senate to include the above proposals in the bill facing financial regulation. Paul A. Volcker, former chairman of the Federal Reserve and an adviser to the Obama administration will be backing the bill, reports Jackie Calmes and Louise Uchitelle for The New York Times. [Why the financial sector is troubled still.]
One segment of the banking sector should be able to dodge the microscope: regional banks.
These smaller banks won’t face the regulations and restrictions the big banks might, giving them more appeal than ever. In fact, two regional banks that that stuck to their traditional business throughout the financial crisis turned in healthy results for the last quarter of a tumultuous year in the banking industry, reports Matthius Rieker for CNN Money. [What are the perks of regional banks?]
- iShares Dow Jones U.S. Regional Banks (IAT): MTB is 2.1%; USB is 17.8%