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April 10, 2014

Fed’s hard line on funding to bring more pain to Wall Street

“The U.S. Federal Reserve’s drive to wean Wall Street off risky funding sources is expected to bring more financial pain to the biggest U.S. banks in the coming months, analysts warned on Wednesday.

“They said bank regulators’ release this week of tough new limits on debt funding is just a preview of other rules that may have even more bite.

“The eight largest U.S. banks must boost their capital levels by an estimated total of $68 billion to meet new limits on debt that regulators approved on Tuesday, a move designed to reduce banks’ reliance on the type of risky financing that fueled the 2007-2009 financial crisis.

“Goldman Sachs and Morgan Stanley could be most affected since regulators proposed a framework that is tougher on businesses like the selling of credit derivatives to protect against corporate defaults, according to Steven Chubak, a banking analyst at Nomura Securities.”

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Read full Reuters article here.

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