Bank stocks reversed early losses Tuesday, as Michael Barr, the Federal Reserve's vice chairman for supervision discussed proposed changes to the Basel III banking requirements.
Barr's speech covered a series of regulatory changes proposed by the Federal Reserve, the Office of Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
The changes relate to the Basel III standards, the recommended international regulatory framework for banks established after the Global Financial Crisis of 2007-09. The measures are generally considered to set out minimum requirements for internationally active banks.
Most expected Barr to outline the final reforms, which have been in the works for several years and are due to be released — reportedly in as many as 450-pages — by Sept. 19. Instead, Barr recommended
Of particular interest were the capital requirements, the cash cushion the rules require banks to set aside to counter the kinds of mortgage and credit defaults that led to the 2007-09 meltdown.
The original reforms reportedly recommended an increase on the order of 16% for banks with $100 billion or more in assets. Barr on Tuesday pointed to a 9% increase, and lifted the floor to banks with assets of $250 billion or more. That exempted banks in the $100 billion to $250 billion range.
Ally, JPMorgan Issue Warnings
Among bank stocks, Wells Fargo pared am early 3% gain to a 0.7% decline.
Meanwhile Bank of America reversed its early advance to a 2.4% loss. Among the Dow Jones banks, JPMorgan tumbled 6.9% and Goldman Sachs skidded nearly 5% lower.
JPMorgan President and Chief Operating Officer Daniel Pinto told an industry conference Tuesday morning that industry expectations for net interest income were "not very reasonable." Afterward, a Keefe Bruyette note said the company's guidance was about 21 cents below consensus views.
In a related note, auto financing specialist Ally Financial tumbled more than 15% in morning trade. Ally's management revised their margin guidance sharply lower, saying they expected increased charge offs and delinquencies during the third quarter.
Goldman Sachs booked its declines early this morning, after comments on Monday from CEO David Solomon. Solomon told the Barclays conference that challenges in fixed income pointed third-quarter FICC and equities results about 10% below what was a very strong quarter the year before.
Bank Stocks Narrow YTD Gains
Ally shares had gained 27% for the year through Monday's close.
Shares of Dow Jones financial leader JPMorgan have climbed 27% so far this year through Monday. They were in a buy zone following a rebound from support at their 10-week moving average.
Wells Fargo has a 10% gain for the year, but has been mired in a consolidation since May. Shares also received a boost early Tuesday from comments made by CFO Mike Santomassimo at Barclays' Annual Global Financial Services Conference. Santomassimo said the bank's credit products were performing well, that the "tide had turned" on wealth advisor attrition and that the bank planned additional share buybacks in the second half of the year, The Fly reported.
Bank of America stock is up about 18% year to date, and is also consolidating.
New guidelines would not go into effect until next year, the Fed has said. In addition, any rule changes would likely be subject to a 60-day comment period, Bloomberg reported, and banks would have the option of requesting an extension.
