Stocks Tumble After Fed Plans Too-Big-To-Fail Bank Counterparty Risk Cap
by Tyler Durden
ZeroHedge.com
03/04/2016
US financials are tumbling after The Fed proposed a rule that would limit banks with $500 bln or more of assets from having net credit exposure to a “major counterparty” in excess of 15% of the lender’s tier 1 capital. Bloomberg reports that The Fed’s governors plan to vote today on the proposal. The implications of this are significant in that it will force some banks to unwind exposures and delever against one another (most notably with potential affect the repo market which governs much of the liquidity transmission mechanisms). Guggenheim’s Jaret Seiberg warns the proposal is likely to be “stringent,” though less onerous than the Dec 2011 proposal… which Goldman Sachs more specifically warned that it could destroy 300,000 jobs.
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