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

Alyssa Farah Griffin: ‘The View’ Co-Host is Pregnant With Child #1!

Alyssa Farah Griffin: ‘The View’ Co-Host is Pregnant With Child #1!

Studying Time: 3 minutes The View co-host Alyssa Farah Griffin is pregnant! On ‘The View,’ Alyssa Farah Griffin breaks the…

By Editorial Board 3 Min Read
Man fatally shot throughout argument over lady at gathering at Tuscaloosa storage unit; suspect jailed
Man fatally shot throughout argument over lady at gathering at Tuscaloosa storage unit; suspect jailed

One individual was killed and a number of other others injured in…

2 Min Read
Amy Duggar Describes Studying Grandfather Was a ‘Predator’
Amy Duggar Describes Studying Grandfather Was a ‘Predator’

Studying Time: 4 minutes Amy Duggar King grew up figuring out and…

6 Min Read

Oponion

Meri Brown to Kody: Cease Taking a look at Me Bare!

Meri Brown to Kody: Cease Taking a look at Me Bare!

Because it seems, Kody Brown isn’t simply egocentric, close-minded and…

January 6, 2025

Ford Shuts Off Orders for New $20,000 Maverick Pickup

Ford F -1.26% Motor Co. is…

January 24, 2022

Okta Says Probe Into Security Breach Finds No Evidence of New Attack

Identity-management provider Okta Inc. OKTA -9.15%…

March 22, 2022

Kuminga injured as Warriors earn spirited win over Memphis

SAN FRANCISCO — The numbers which…

January 5, 2025

Carrie Underwood Pregnant: Does She Need Extra Children?

Studying Time: 4 minutes Is Carrie…

September 20, 2025

You Might Also Like

Shares fall as US-China commerce struggle reignites after Trump threatens tariff hike
Markets

Shares fall as US-China commerce struggle reignites after Trump threatens tariff hike

Home Majority Chief Steve Scalise responds to Chuck Schumer’s shutdown feedback, JD Vance’s viral submit and the toll of the…

6 Min Read
Jamie Dimon warns of main market threat in subsequent few years
Markets

Jamie Dimon warns of main market threat in subsequent few years

CPA and market analyst Dan Geltrude joins ‘Mornings with Maria’ to interrupt down the record-setting rally fueled by synthetic intelligence,…

4 Min Read
Meme inventory mania 2.0
Markets

Meme inventory mania 2.0

Pacer ETFs President Sean O’Hara discusses the advantages of ETFs and lays out his favourite investments on ‘The Claman Countdown.’…

4 Min Read
Traders have fun Japan’s ‘Iron Lady’ election win
Markets

Traders have fun Japan’s ‘Iron Lady’ election win

Federated Hermes CIO Stephen Auth weighs in on Japan's first elected feminine prime minister and provides an concept on what…

3 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?