A powerful Wall Street alliance has fractured over proposed changes to Federal Reserve capital rules. JPMorgan Chase and Bank of America are clashing with Goldman Sachs and Morgan Stanley over tweaks to the global systemically important bank (GSIB) surcharge. This regulatory shift involves billions of dollars in capital requirements, according to a Reuters report.
The dispute focuses on how the Fed calculates capital for short-term wholesale funding. The proposed formula benefits institutions reliant on wholesale funding, such as Goldman Sachs and Morgan Stanley. Conversely, the change provides less capital relief than expected for deposit-heavy banks like JPMorgan and Bank of America.
JPMorgan and Bank of America are now lobbying the Fed to scrap the proposal. They argue the rule could restrict lending and favor riskier trading activities. The final decision will exert a multi-billion dollar impact on capital levels and long-term strategic decisions for the largest U.S. banks.