Bank stocks gain after report about lighter capital requirements

By Steve Gelsi

Speculation about easier Basel III endgame regulations from the U.S. Federal Reserve lifts bank stocks

Bank stocks gained Monday after Bloomberg News reported that the U.S. Federal Reserve is circulating a lighter version of its proposed capital requirements that have drawn opposition from the industry.

The report said the Federal Reserve is sharing with other regulators a three-page list of potential revisions to the so-called Basel III endgame proposal that has been under study since last year.

Banks may escape proposed capital requirements that would have had a large impact on financial firms with larger trading units, according to Bloomberg, which cited unnamed sources familiar with the situation.

The sources said the capital required for banks to hold in case of rocky financial times could increase by as little as 5% instead of the initial 16% increase.

"The Federal Reserve hasn't made any decisions on timing, process or substance," a spokesman for the Fed said in an email to MarketWatch inquiring about the Bloomberg report.

The KBW Nasdaq Bank Index BKX rose 1.7%. The S&P Financial Select SPDR Fund XLF gained 1% and the SPDR S&P Regional Banking ETF KRE advanced 2%.

Among individual names, Citigroup Inc. (C) rose 2.3%, Goldman Sachs Group Inc. (GS) jumped 2.6%, US Bancorp (USB) gained 2% and Charles Schwab Corp. (SCHW) advanced 1.6%.

Morgan Stanley (MS) rose 1% and Wells Fargo & Co. (WFC) moved up 1.6%.

The rules have been subject to speculation that they would be at least partially rolled back.

Politicians from both sides of the aisle have been pushing for changes since the Fed and the Federal Deposit Insurance Corp. unveiled the initial proposal last year.

Also read: Biden's banking rules will fuel inflation, lawmakers say

Fed Vice Chairman for Supervision Michael Barr said in May that he expects there to be "broad, material changes" to the rule proposal in response to comments.

Greg Robb contributed to this report.

-Steve Gelsi

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06-24-24 1613ET

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