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New rules forces largest banks to hold another $68B in capital

  • Finalizing the criteria on the eight largest banks' leverage ratios - a minimum 5% at the holding company level and 6% at the bank subsidiary level - U.S. regulators impose a far tougher standard than international norms of 3%.
  • The eight affected: BK, BAC, C, GS, JPM, MS, STT, WFC.
  • The regulators at work were the Fed, the FDIC, and the OCC, and the Fed's Dan Tarullo indicates he wants to go further, signaling the central bank may boost the risk-based capital surcharge to a higher level than the international standard. The most to lose in this scenario would be investment banks like Goldman and Morgan Stanley who don't have the deposit bases of their retail brethren.
  • Banks have until January 1, 2018 to comply with the new rule.
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Comments (19)
  • maybenot
    , contributor
    Comments (4472) | Send Message
     
    good.
    8 Apr 2014, 04:46 PM Reply Like
  • wyostocks
    , contributor
    Comments (8811) | Send Message
     
    Does anyone seriously think that these new "rules" won't change between now and January 1, 2018?
    8 Apr 2014, 04:49 PM Reply Like
  • maybenot
    , contributor
    Comments (4472) | Send Message
     
    of course they will...a little here...a little there.

     

    but it seems to be a nice wake-up call. seems to be.

     

    the big boys will figure out a way around them -- as usual.

     

    but it's better than a "wild west" type of attitude.
    8 Apr 2014, 05:12 PM Reply Like
  • MatchlessGlory
    , contributor
    Comments (37) | Send Message
     
    So, do you believe our government should exercise the same level of responsibility?

     

    The hypocrisy of it all.
    8 Apr 2014, 07:02 PM Reply Like
  • spinrbait
    , contributor
    Comments (441) | Send Message
     
    investers will probably pull money out of american banks and into european banks because they will make more money. so yes, there are going to be changes. one way or another
    9 Apr 2014, 08:48 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (9388) | Send Message
     
    Looks like its time for the TBTF CEOs to buy a whole new set of congressmen...
    8 Apr 2014, 05:32 PM Reply Like
  • wyostocks
    , contributor
    Comments (8811) | Send Message
     
    DVL

     

    They have 5 years to do it.
    8 Apr 2014, 05:49 PM Reply Like
  • jumpnjoey77
    , contributor
    Comments (718) | Send Message
     
    And get a waiver for another 2 or 3 years after that.
    8 Apr 2014, 06:00 PM Reply Like
  • papayamon
    , contributor
    Comments (1190) | Send Message
     
    It's good news in the sense that it sets the upper limits, which will get pecked down before implementation.
    8 Apr 2014, 07:52 PM Reply Like
  • Hello Again 83
    , contributor
    Comments (490) | Send Message
     
    I love Dick Bove's response to the extra capital. He nails it. Click Link

     

    http://cnb.cx/Q1In1N
    8 Apr 2014, 08:36 PM Reply Like
  • swaps
    , contributor
    Comments (1338) | Send Message
     
    He does have an interesting view. Kind of loosely reminds me of the 70s when I worked for a multi state developer. Real estate projects were too risky to be funded by banks directly, but the banks instead funneled money to real estate investment trusts who financed the risky projects with an even higher markup from what the bank rate was, of course.

     

    When this bubble crashed - offloading the deals onto REIT;s did not make the deals any better, just even less viable. The disaster took ten years to work out as developers and their troubled projects were sequentially take out so as not to have a total and instant wipeout. My employer was at the end of the line.
    8 Apr 2014, 09:19 PM Reply Like
  • Hello Again 83
    , contributor
    Comments (490) | Send Message
     
    Great point Swaps
    9 Apr 2014, 09:31 AM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11474) | Send Message
     
    It is not the leverage ratio that jeopardizes the banks and our financial system as much as it is the laws that let the avoid mark to market, hide derivatives transactions in black boxes, not report when the need to have the central bank backstop their loans, and allows them to directly invest and gamble in stocks, commodities, currencies, and derivatives.

     

    Banks were designed to provide loans and liquidity to the broader market, not absorb assets so they can take risk themselves. If they want to do that they should probably be limited to 5-10x leverage and forced to report their holdings monthly. Either be a business or be a bank. TBTF banks are not banks as we are taught they are and worse yet, their calamitous business model is all premised off of using taxpayer/government money to support them when bets go horribly wrong. In the meantime the US financial system limps along because TBTF banks are shirking their business and gobbling up banks that do actually provide banking services to those that want to borrow.
    8 Apr 2014, 08:41 PM Reply Like
  • spinrbait
    , contributor
    Comments (441) | Send Message
     
    mark to market accounting was a big part of the banking crisis in 08-09.much of the crises was really just on the books. even the banks that failed, were making money every day. they weren't failed in the sense that we think of say a furniture store fails because it can't pay its bills.
    when the mortgage market crashed, the banks' mortgage back securities became virtually worthless because of fear. no one would buy them. so under mark to market, they had to be priced as low as .10-.20 cents on the dollar. even though almost everyone was still making their house payments. and many of the securities were still very profitable. but marking them down to market values, diluted the capital banks are required to hold. this was even when the banks didn't want to sell the securities. they still had to mark them as basically worthless. even though in reality they weren't. finally mark to market was suspended for a temporary period. then fair value accounting was used, and banks could reflect what the securities were worth.
    of course fair value accounting is also easily manipulated. but if my understanding is correct, mark to market accounting became standard because of the enron debacle. but it's not really appropriate for many bank assets.
    9 Apr 2014, 09:02 AM Reply Like
  • sethmcs
    , contributor
    Comments (3395) | Send Message
     
    Maybe this is the fed's way of saying to MS and GS. Do you really want to be a bank?
    8 Apr 2014, 09:26 PM Reply Like
  • markrpat
    , contributor
    Comments (216) | Send Message
     
    Remember, the real threat to investors in 2008-2009 was not those holding stocks, bonds or real estate...it was holding cash in the form of "safe" money market funds. By many accounts, the treasury/FED had to step in to protect these so-called safe caches. According to Treasury Secretary Hank Paulson, that was his primary reason for holding a weekend meeting with bankers and Dr. BB. Also know that this was a "cookie cutter" meeting of 1907 library meeting organized by JP Morgan himself. JP Morgan locked bankers in his library to sort it out while he played solitaire. The 1907 panic was impetus for creation of Federal Reserve on Jeckyll Island.

     

    Does anyone even know who Jack Lew is? (hint)...he is the silent one compared with recent persons holding the post.
    8 Apr 2014, 09:33 PM Reply Like
  • spinrbait
    , contributor
    Comments (441) | Send Message
     
    jack lew is the treasury secretary. came from citigroup
    9 Apr 2014, 09:04 AM Reply Like
  • june1234
    , contributor
    Comments (3066) | Send Message
     
    Derivatives markets including the unregulated underfunded swaps markets, at the heart of the meltdown stand at around $734 trillion not billion . I doubt there is 1% out there to cover it if something goes wrong like in 08
    9 Apr 2014, 05:49 AM Reply Like
  • Wow72
    , contributor
    Comments (575) | Send Message
     
    At current time this does nothing except allows the banks to hoard more cash? We need to have cash start to circulate, no? This is ridiculous.... We need level heads governing... Not hot heads!
    9 Apr 2014, 07:08 AM Reply Like
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