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JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc (GS), Citigroup Inc (NYSE:C): Who is Hit Most By Fed’s New Rules?

While Federal Reserve is showing greater commitment in averting a financial crises along the lines of the previous one, JPMorgan Chase & Co. (NYSE:JPM) is set to be affected among its peers including Goldman Sachs Group Inc (NYSE:GS) and Citigroup Inc (NYSE:C) by the new capital requirements. On Bloomberg, Caroline Hyde revealed that JPMorgan might be short as much as $20 billion in light of the new rules.

JPMorgan Chase & Co (NYSE:JPM)

“[…] United States goes a step further. If you are a globally significant bank you will have to have 11.5% core capital. Now, this is a problem for JPMorgan Chase & Co. (NYSE:JPM). It looks as though they could be $20 billion short, that means that what they won’t be paying so much out in dividends, they won’t be paying too much out to investors. […] The rest of the banks, Goldman Sachs Group Inc (NYSE:GS), Citigroup Inc (NYSE:C) and the likes seem to be having enough capital there but they are going to have to be far less dependent on whole sale funding […],” informed Hyde.

Fed’s new requirements are particularly high as compared to those set by the Financial Stability Board, which is responsible for advising the G 20 countries on such requirements pertaining to banks operating in their respective countries. Hyde mentioned that this core tier capital requirement advised by the Board stands at 7%, which goes up to 9.5% if the bank is a globally significant one such as JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS) or Citigroup Inc (NYSE:C). Fed has apparently taken this even a step further.

JPMorgan’s large bill is because of the high amount of risk weighted assets that the bank has on its balance sheet as compared to its peers. In the strict sense of the word, it’s not really a bill as money is not going out of the bank’s coffers, but it cannot be invested in riskier ventures to bear more return, or handed out to shareholders.

Citigroup Inc (NYSE:C) is down about 0.47% in the pre-market trading while JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS) are each down about 0.58%  and 0.83% respectively.

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