The likely expansion of the Federal Reserve's stress tests beyond the largest bank holding companies could send bank stocks reeling even further -- but shouldn't have much of an immediate effect on most of the six additional publicly traded holding companies that would be subject to the ramped-up government scrutiny.
According to a Bloomberg report, citing "people familiar with the discussions," the Federal Reserve is looking to expand its plan for formal annual stress tests to review banks' capital adequacy, beyond the original group of 19 that have gone through two rounds of the tests, to include all financial holding companies with total assets in excess of $50 billion. Then again, the regulators could go a lot further, since the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation recently proposed guidelines on stress testing for banks with total assets of more than $10 billion.
With the banks already suffering fee revenue declines from the CARD act -- which ended several practices that boosted credit card fee revenue -- and the coming implementation of the Durbin Amendment -- the provision of the Dodd-Frank banking reform legislation which will severely cap the interchange fees that large banks charge retailers to process debit card transactions -- an expansion of the Federal Reserve's stress tests to all bank holding companies with total assets over $50 billion could delay industry consolidation and even have a chilling effect on lending, with lenders looking to boost capital ratios by avoiding balance sheet expansion.
The group of 19 major banks that underwent the first two rounds of stress tests included the "big four" of Bank of America , JPMorgan Chase, Citigroup and Wells Fargo , as well as investment banking giants Goldman Sachs and Morgan Stanley. Large regional players that underwent the previous stress tests included U.S. Bancorp, PNC Financial Services, SunTrust, B&T, Regions Financial and Fifth Third Bancorp.
According to a Bloomberg report, citing "people familiar with the discussions," the Federal Reserve is looking to expand its plan for formal annual stress tests to review banks' capital adequacy, beyond the original group of 19 that have gone through two rounds of the tests, to include all financial holding companies with total assets in excess of $50 billion. Then again, the regulators could go a lot further, since the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation recently proposed guidelines on stress testing for banks with total assets of more than $10 billion.
With the banks already suffering fee revenue declines from the CARD act -- which ended several practices that boosted credit card fee revenue -- and the coming implementation of the Durbin Amendment -- the provision of the Dodd-Frank banking reform legislation which will severely cap the interchange fees that large banks charge retailers to process debit card transactions -- an expansion of the Federal Reserve's stress tests to all bank holding companies with total assets over $50 billion could delay industry consolidation and even have a chilling effect on lending, with lenders looking to boost capital ratios by avoiding balance sheet expansion.
The group of 19 major banks that underwent the first two rounds of stress tests included the "big four" of Bank of America , JPMorgan Chase, Citigroup and Wells Fargo , as well as investment banking giants Goldman Sachs and Morgan Stanley. Large regional players that underwent the previous stress tests included U.S. Bancorp, PNC Financial Services, SunTrust, B&T, Regions Financial and Fifth Third Bancorp.
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