This website collects cookies to deliver better user experience. Cookie Policy
Accept
Sign In
The Wall Street Publication
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Reading: Fed Regulatory Agenda Could Swing Bank Stocks
Share
The Wall Street PublicationThe Wall Street Publication
Font ResizerAa
Search
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© 2024 The Wall Street Publication. All Rights Reserved.
The Wall Street Publication > Blog > Markets > Fed Regulatory Agenda Could Swing Bank Stocks
Markets

Fed Regulatory Agenda Could Swing Bank Stocks

Editorial Board Published December 22, 2021
Share
Fed Regulatory Agenda Could Swing Bank Stocks
SHARE

Next year, a Democratic appointee is set to once again be leading bank supervision at the Federal Reserve. Times are less tense than under President Obama, when the Dodd-Frank Act was first being implemented and troubled banks were at the center of attention. But that doesn’t mean bank investors shouldn’t be paying close attention.

In the most recent crisis, the pandemic, big banks avoided massive credit losses and were able to lend, make markets and take deposits at rough moments. Some might even argue banks were a bit too constrained and could have helped even more borrowers and investors with more regulatory flexibility.

Still, both sides of the political spectrum would probably like changes to existing bank regulation. Some Democrats might want some of the prior administration’s moves undone, like changes to the Volcker Rule. But the next vice chair for supervision—whom President Biden is set to soon nominate—may prioritize other policy areas, like addressing climate risk or the rise of cryptocurrencies. Many significant changes also need the backing of the Fed’s board of governors, whose composition is in flux.

Yet even absent a push for something seemingly dramatic, like breaking up banks, technical changes to capital requirements and risk-weighting could still be quite consequential for bank shareholders. Changes to capital rules can have an impact on shareholder payouts and returns on equity—important variables for bank stocks.

Already, banks are having to make some moves to ensure they can fully lean into potential asset growth under current capital requirements, like letting some deposits run off, slowing capital returns or issuing preferred shares, notes Autonomous Research analyst John McDonald.

There are some important capital rules that still need to be finalized, like how banks account for the risk of operational failures, or the risks in their trading books. Plus, even if the basic contours of the stress-test regime put in place during the Trump years don’t change, tweaking some of the underlying assumptions or parameters can make a sizable difference.

In some cases, even inaction on things such as leverage ratios and big-bank capital surcharges could be impactful, notes Margaret Tahyar, co-head of the financial institutions practice at Davis Polk & Wardwell. Banks’ growing overall size during the pandemic is already factoring into capital ratios.

All of this can, in theory, add up to meaningful changes to capital requirements for big banks. “This uncertainty could give some pause to investors,” says Wolfe Research analyst Steven Chubak.

Then there is the increasingly prominent issue of bank mergers and acquisitions, with many Democrats calling for much tougher criteria or even a moratorium for banks of a certain size. While the very biggest global banks may not be doing massive deals, large regional banks are still consolidating. And in a break with the past, acquiring banks’ stocks have sometimes reacted positively to deals, with investors liking the advantages of size.

It takes a vote of the Fed’s board to formally block a merger. But even without that, a vice chair for supervision could potentially discourage deals in private conversations, according to Jeremy Kress, a University of Michigan’s Ross School of Business professor who has advised Democratic lawmakers on bank M&A.

Big-bank stocks were a great bet starting in late 2016, the last time investors bet that interest rates were poised to rise. This time, a key variable—the Fed regulatory agenda—will be different.

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the December 23, 2021, print edition as ‘Fed Agenda Could Swing Bank Stocks.’

TAGGED:MarketsPAIDWall Street Publication
Share This Article
Twitter Email Copy Link Print
Previous Article Codecademy Strikes 5 Million Sale to Prosus-Backed Skillsoft Codecademy Strikes $525 Million Sale to Prosus-Backed Skillsoft
Next Article Turkey’s Plan to Save the Lira Is a Risky Bluff Turkey’s Plan to Save the Lira Is a Risky Bluff

Editor's Pick

Banish Boredom With These Prime Day Board Recreation Offers

Banish Boredom With These Prime Day Board Recreation Offers

With summer time holidays nonetheless stretching off into the space, making the most of Prime Day board sport offers or…

By Editorial Board 13 Min Read
Making wholesome snacks a behavior when afternoon vitality slumps strike at work
Making wholesome snacks a behavior when afternoon vitality slumps strike at work

By CATHY BUSSEWITZ, Workers Author NEW YORK (AP) — When Claire Paré…

8 Min Read
Want You Have been Right here: A 14-day Asian cruise with unforgettable views
Want You Have been Right here: A 14-day Asian cruise with unforgettable views

SINGAPORE, BANGKOK, HONG KONG, VIETNAM: Harmony’s Eduardo and Beatriz Reyes went on…

2 Min Read

Oponion

Christopher Schwarzenegger Particulars Weight Loss Secrets and techniques

Christopher Schwarzenegger Particulars Weight Loss Secrets and techniques

Studying Time: 3 minutes Christopher Schwarzenegger is sharing his weight…

May 12, 2025

CNN exec Jeff Zucker’s ouster shows peril of hiding work romance

NEW YORK — For all the…

February 6, 2022

Kate Middleton Will Proceed to ‘Restrict Stress’ Amid Well being Points

Kate Middleton is doing her finest…

October 31, 2024

15 Of The Finest Ski Jackets for Males in 2024 | Fashion

We independently consider all beneficial services.…

December 24, 2024

Exclusive Revelations: A “Highly Confidential” Report from Qatari Secret Services Clears Tayeb Benabderrahmane and Exposes Qatar’s Political Schemes

A recently disclosed “highly confidential” document,…

September 27, 2024

You Might Also Like

United Airways says much less uncertainty opens door to ‘robust end’ to 2025
Markets

United Airways says much less uncertainty opens door to ‘robust end’ to 2025

Transportation Secretary Sean Duffy discusses home automotive manufacturing and air journey security on ‘The Big Money Show.’ United Airways was…

4 Min Read
Bitcoin breaks 3,000 worth document as lawmakers start ‘Crypto Week’ in Washington
Markets

Bitcoin breaks $123,000 worth document as lawmakers start ‘Crypto Week’ in Washington

Sen. Cynthia Lummis, R-Wyo., discusses crypto regulation and tax reform on Making Cash. Bitcoin hit a document excessive on Monday…

4 Min Read
Copper costs hit document excessive after Trump declares 50% import tariff
Markets

Copper costs hit document excessive after Trump declares 50% import tariff

President Donald Trump introduced his administration will impose a 50% tariff on imported copper, marking a brand new ecalation in…

4 Min Read
Tesla shares slide after Musk declares new political transfer
Markets

Tesla shares slide after Musk declares new political transfer

FOX Enterprise’ Stuart Varney analyzes President Donald Trump and former DOGE head Elon Musk’s relationship after Musk’s public criticism of…

6 Min Read
The Wall Street Publication

About Us

The Wall Street Publication, a distinguished part of the Enspirers News Group, stands as a beacon of excellence in journalism. Committed to delivering unfiltered global news, we pride ourselves on our trusted coverage of Politics, Business, Technology, and more.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Term of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices

© 2024 The Wall Street Publication. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?