But that cushion would be almost completely wiped out under rules that would require the equivalent of an additional two percentage points of capital. Six of the country’s biggest banks-JPMorgan, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs-currently sit atop an estimated $118 billion in so-called excess common equity tier 1 capital, according to Bloomberg Intelligence. Investors are of course worried about how the stricter requirements will affect lenders’ ability to repurchase shares. Though the proposals likely won’t be implemented for years, they have already drawn criticism from top bank executives who claim the plans could make them less competitive against European rivals and buyout giants.
The changes are part of the biggest revamp of capital rules for US banks since the aftermath of the 2008 financial crisis. “As stress in non-bank financial markets is often transmitted to the banking system, both directly and indirectly, it is critical that banks have enough capital to remain resilient to those stresses,” Michael Barr, the Fed’s vice chairman for supervision, recently said. will vote Thursday to propose the measures, part of an effort to put the US on track to adopt its final version of international banking standards known as the Basel III endgame. The US Federal Reserve and the Federal Deposit Insurance Corp. Wall Street’s biggest banks are squawking about new safeguards for the financial system, including regulations that could erase almost all of the $118 billion in excess capital they’ve squirreled away over the past decade.
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