Growing Regulatory Concerns Push US Bank Stocks Downward

Growing Regulatory Concerns Push US Bank Stocks Downward

Time Stamp: August 15, 2023 6:48 PM
Source Node: 2221293

The stocks
of US banks stumbled today (Tuesday) amidst fears of stricter regulations and the possible additional downgrading of several lenders in the country. Specifically, the
S&P 500 Banking Index, which tracks the performance of major banking
companies, slumped approximately 3%, according to market data from Reuters
and CNBC.

According
to Reuters, the decline is the lowest in a month. The outlet noted that the
shares of JPMorgan Chase saw one of the biggest falls, dropping by almost 4%.

The decline
in the banking index occurred as Martin Gruenberg, the Chairman of the US Federal
Deposit Insurance Corporation (FDIC), on Monday disclosed that the
agency was looking to revamp how top regional lenders in the country draft
their ‘living wills’ for potential failures. A living will is a document
that outlines how a bank would be liquidated if it were to fail.

The
Dodd-Frank Act, a federal law in the United States enacted in the aftermath of
the 2008 financial crisis, requires lenders with consolidated assets of $50
billion or more to prepare a living will. Gruenberg believes that upcoming changes
to requirements in preparing the ‘will’ would make it “significantly more effective”, Reuters reported.

The
proposal is part of banking industry regulators’ recent efforts to increase their
oversight over the US
banking industry, especially in the aftermath of the recent crises in the
sector that saw
the collapse of Silicon
Valley Bank, Silvergate Bank and Signature Bank. In fact, to step up its
regulatory oversight, US bank supervisors, including FDIC, recently put a proposal forward that could make capital
requirements for leading US banks jump as high as 16%, Finance Magnates reported.

Possible Additional Downgrade

Meanwhile, an analyst
with Fitch Ratings told CNBC on Tuesday that the credit rating agency may be
compelled to slap rating downgrades on several US banks, including the lending giant, JPMorgan Chase. Analyst’s warnings came several days after rival
Moody’s lowered the credit scores of several small to mid-sized US lenders.

In a note seen by Reuters, Moody’s warned that it could extend the rating downgrades to other top lending institutions, including State
Street and Bank of New York Mellon. This is even as the second quarter results of many banks showed that they were struggling to
increase their profit, Moody’s said.

The credit rating agency noted that the situation could handicap the ability of US banks to generate internal capital.


Devexperts updates DXcharts; FCA warns against seven companies; read today’s news nuggets.

The stocks
of US banks stumbled today (Tuesday) amidst fears of stricter regulations and the possible additional downgrading of several lenders in the country. Specifically, the
S&P 500 Banking Index, which tracks the performance of major banking
companies, slumped approximately 3%, according to market data from Reuters
and CNBC.

According
to Reuters, the decline is the lowest in a month. The outlet noted that the
shares of JPMorgan Chase saw one of the biggest falls, dropping by almost 4%.

The decline
in the banking index occurred as Martin Gruenberg, the Chairman of the US Federal
Deposit Insurance Corporation (FDIC), on Monday disclosed that the
agency was looking to revamp how top regional lenders in the country draft
their ‘living wills’ for potential failures. A living will is a document
that outlines how a bank would be liquidated if it were to fail.

The
Dodd-Frank Act, a federal law in the United States enacted in the aftermath of
the 2008 financial crisis, requires lenders with consolidated assets of $50
billion or more to prepare a living will. Gruenberg believes that upcoming changes
to requirements in preparing the ‘will’ would make it “significantly more effective”, Reuters reported.

The
proposal is part of banking industry regulators’ recent efforts to increase their
oversight over the US
banking industry, especially in the aftermath of the recent crises in the
sector that saw
the collapse of Silicon
Valley Bank, Silvergate Bank and Signature Bank. In fact, to step up its
regulatory oversight, US bank supervisors, including FDIC, recently put a proposal forward that could make capital
requirements for leading US banks jump as high as 16%, Finance Magnates reported.

Possible Additional Downgrade

Meanwhile, an analyst
with Fitch Ratings told CNBC on Tuesday that the credit rating agency may be
compelled to slap rating downgrades on several US banks, including the lending giant, JPMorgan Chase. Analyst’s warnings came several days after rival
Moody’s lowered the credit scores of several small to mid-sized US lenders.

In a note seen by Reuters, Moody’s warned that it could extend the rating downgrades to other top lending institutions, including State
Street and Bank of New York Mellon. This is even as the second quarter results of many banks showed that they were struggling to
increase their profit, Moody’s said.

The credit rating agency noted that the situation could handicap the ability of US banks to generate internal capital.


Devexperts updates DXcharts; FCA warns against seven companies; read today’s news nuggets.

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