WASHINGTON: Big U.S. banks will have to resume holding an extra layer of loss-absorbing capital against U.S. Treasuries and central bank deposits from next month after the Federal Reserve said on Friday it would not extend a temporary pandemic regulatory break due to expire this month.
"Wall Street bank stocks will get punished because now they will have to put more money aside," Edward Moya, senior market analyst at foreign exchange brokerage Oanda, said in an email. But the issue has become an unlikely political hot potato, with powerful Democrats pressuring Fed Chair Jerome Powell against granting Wall Street what they say is an unwarranted break given big banks have plenty of cash to buy back shares and dish out dividends.
Banks say central bank reserves and U.S. Treasuries effectively hold no risk and it makes little sense to penalize them.
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