Displaying items by tag: banks

(Washington)

A lot of financial industry participants have been hoping that the Trump administration might ultimately disassemble much of Dodd-Frank. Bits and pieces have been toned down so far, but the regulation remains mostly intact. Well, it seems like it is going to remain that way. SEC chief Jay Clayton just confirmed that while the SEC may seek to modify Dodd-Frank around the edges, there won’t be major changes. “I don’t think Dodd-Frank is changing a great deal, just to put a pin in it”, said Clayton.

FINSUM: Clearinghouses might see some changes, but otherwise Clayton seems fairly adamant that Dodd-Frank is staying put.

(New York)

In what could be a big gain for banks, US regulators are poised to roll back parts of the dreaded Volcker rule, or the Dodd-Frank regulation that virtually ended proprietary trading on Wall Street. One of the big points of loosening is that it will no longer be assumed that if a position is held for less than 60 days that it is a violation of the rule. Banks will also be able to demonstrate that they are market-making rather than proprietary trading much more simply.

FINSUM: Banks have long complained that the Volcker Rule meant they could not provide as much fixed income liquidity to markets as they once did. That should change now, theoretically.

(New York)

Investors who own bank stocks or ETFs have probably been shocked over the last couple of days. The financial sector lost 4% yesterday alone. Many may be wondering why. While no one is quite sure, there do seem to be some concrete reasons, and not just because of the Italian drama. The bigger culprit is likely because of tumbling US Treasury yields, which have fallen from well above 3%, to well below 2.9%. Banks stocks have historically performed poorly in periods of flattening yield curves. Lower rates and yields hurt banks’ net interest margin.

FINSUM: US banks have very little exposure to Italy, so there is no reason for any meltdown fears, yet the sector has reacted almost overly strongly. It seems the only explanation has to do with US yields falling.

(New York)

Bank stocks have had somewhat of a rough time this year. Like the rest the of the market they have been subject to turbulence. However, Barron’s says that clear sailing might lay ahead, as the stocks are looking less risky and likely to have more gains. The reason why is that bank stocks have been showing less and less beta lately, meaning they are trading at less relative volatility to the market than previously. This will lower their cost of capital and keep things steadier as rates rise, which will be bullish for performance. According to one research analyst, “Higher rates will have a positive impact on earnings, loan growth appears to be picking up, and we expect further regulatory relief”.

FINSUM: Given that higher rates improve net interest margins for banks, and the fact that there is significant regulatory relief occurring, we are feeling optimistic.

(New York)

The Trump era of deregulation is really starting to play out for the financial services industry. On top of the collapse of the Volcker rule, banks might be about to enjoy a major concession from regulators: the assumption that short-term trades are automatically a violation of the rule. The Fed and other regulators are planning to drop the assumption that a position held by a bank for less than 60 days is a violation of the Volcker rule.

FINSUM: This would be a major development as banks would be left to comply with the rule on their own terms. That shifts the burden of proof onto regulators, who would now need to prove a trade was a violation.