by Beth Connolly on April 30, 2012
A meeting scheduled for this Wednesday will include the CEOs of four of the nation’s largest banks: Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Bank of America, the Wall Street Journal reports.
In a letter Friday, five financial services trade organizations wrote to the Fed in protest of a rule proposed in December that would curb single-counterparty exposure limits as a part of Dodd-Frank legislation.
The letter and meeting comes shortly before the comment period for the rule closes Monday. The letter was authored by the Clearing House, the American Bankers Association, the Financial Services Roundtable, the Financial Services Forum and the Securities Industry and Financial Markets Association, according to the WSJ.
Big banks oppose the rule, which would “limit net credit exposures between any two of the nation’s six largest financial firms to 10% of a company’s regulatory capital.” Friday’s letter argued that the Fed hasn’t provided evidence to prove that the 10% cap (lower than the 25% cap placed on most financial firms) is necessary.
Further analysis from the WSJ:
The counterparty credit limit presents a bigger threat to foreign governments’ ability to sell their debt than the Volcker rule, a high-profile piece of the overhaul legislation that aims to limit risk-taking by federally insured banks, said one industry executive.
Banks, foreign governments and other financial-industry players submitted thousands of pages of objections to the rule earlier this year, and the Fed recently clarified that it wouldn’t enforce that rule for two years.
The banks also want the Fed to exempt certain “high-quality” government bonds from counting against the credit limit, just as U.S. Treasurys are exempt. Industry lobbyists have been reaching out to foreign embassies and are expecting foreign governments, especially in Europe, to put pressure on U.S. regulators.