In compliance with the stringent regulatory measures,
The PNC Financial Services Group, Inc.
) intends to wind down Market Street Funding LLC, a
commercial-paper firm that it operates.
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Since 1995, Pittsburgh-based PNC Financial has managed Market
Street Funding LLC. The firm helps clients to get short-term
funding. Market Street issues securities backed by commercial
paper to its clients. The company had $5.9 billion of outstanding
short-term debt as of Jun 30.
Market Street's debt will be taken over by PNC Financial, as part
of the wind-down. The closure process will be completed by the
end of this year and Market Street's commercial paper will be
repaid in full throughout that period.
Firms such as Market Street have been operated by for major banks
to fund loans and other forms of financing. However, with the
sluggish macroeconomic environment causing weak demand in loans,
such firms have lost their value.
The international bank-capital standards, Basel III, might demand
banks to increase the capital they hold against such companies
and this has prompted PNC Financial to close Market Street. When
Basel III is implemented, banks would need to set aside more
capital as buffer to tide over unexpected losses. Additionally,
the regulations will restrict banks from making risky
Overall, we believe that structural changes in the sector will
continue to hamper business expansion and investor confidence.
Moreover, several factors such as asset-quality troubles,
mortgage liabilities and tighter regulations will likely affect
U.S. banks in the quarters ahead. However, foraying into the new
capital regime will ensure long-term stability and security for
PNC Financial currently carries a Zacks Rank #2 (Buy). Other
better performing banks include
BofI Holding, Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).