WASHINGTON, Sept 11 (Reuters): US bank investors, analysts and executives were trying to figure out on Wednesday how lenders would fare under revised hikes in capital requirements, with considerable uncertainty over what specifics will emerge from the Federal Reserve and other regulators, and the presidential election a looming wild card.
The Fed's regulatory chief Michael Barr on Tuesday outlined a plan to raise big bank capital by 9 per cent, easing an earlier proposal to hike capital 19 per cent. It was a major concession to Wall Street banks that had lobbied to water down the "Basel" draft.
The central bank is expected to publish the new version and start taking on industry feedback in coming weeks.
Despite the apparent industry victory, analysts, executives and two regulatory sources said the plan was still mired in uncertainty, with key details unclear and the Nov. 5 election casting doubt over whether it would survive a new administration.
Speaking at the Brookings Institution, a Washington think tank, Barr said on Tuesday he was not rushing to finalize the rules before the election. Vice President Kamala Harris, the Democratic candidate, has called for strong bank rules, while Republican candidate Donald Trump has pledged to cut red tape.
If he won, Trump could quickly appoint Republican officials at the banking agencies who could shelve the entire plan, while a Harris administration would almost certainly finalize-if not strengthen it, analysts and industry officials have said.
"The future of this proposal is very closely tied to the presidential election," said Ian Katz, managing director of policy research firm Capital Alpha Partners. "A Basel agreement might be possible under Republican regulators, but it would look different and almost surely be easier on the banks."
The revised plan failed to buoy bank stocks on Tuesday, with the S&P 500 banking index closing down 2.88 per cent on worries over economic growth, the trajectory of Fed interest rate cuts, and banks' earnings outlook.
"The new capital requirements are measurably lower than initially proposed. [That] should improve some thinking around better earnings growth, but all of that energy is getting sucked away," Brian Mulberry, portfolio manager at Zacks Investment Management which holds several bank stocks, wrote in an email.
In public campaigns and conversations with Washington lawmakers and regulators, Wall Street banks have argued more capital reserves are unnecessary and will hurt the economy. They have threatened to sue to kill the final rule on grounds the US central bank and other agencies did not follow the proper procedure.
