Stocks Tumble After Fed Plans Too-Big-To-Fail Bank Counterparty Risk Cap

US financials are tumbling after The Fed proposed a rule that would limit banks with $500 bln or more of assets from having net credit exposure to a “major counterparty” in excess of 15% of the lender’s tier 1 capital. Bloomberg reports that The Fed's governors plan to vote today on the proposal. The implications of this are significant in that it will force some banks to unwind exposures and delever against one another (most notably with potential affect the repo market which governs much of the liquidity transmission mechanisms). Guggenheim's Jaret Seiberg warns the proposal is likely to be "stringent," though less onerous than the Dec 2011 proposal.

  • *FED ISSUES PROPOSAL ON BANK INTERCONNECTEDNESS IN STATEMENT
  • *FED TO PROPOSE BIG BANKS CAP CREDIT RISK TO EACHOTHER AT 15%
  • *BANKS WITH $500 BLN OF ASSETS WOULD FACE 15% LIMIT UNDER RULE

JPMorgan is tumbling...

(Click on image to enlarge)

As Bloomberg reports,

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Power Patterns 4 years ago Contributor's comment

Add a chart of WFC, MS, XLF in same time frequency and we see? A double top on the day and see ya to the downside.

Donald Kaplan 4 years ago Member's comment

:-)