Markets

Extra capital requirements hammer bank stocks

Bank stocks dropped sharply today, helping drag down indexes around the world amidst a torrent of worrying news. In East Asia , the death of North Korean dictator Kim Jong Il spooked markets and raised fears that geopolitical tensions in the region could escalate. Mario Draghi, the president of the European Central Bank, nixed the idea of buying more government bonds from beleaguered eurozone nations to prop up debt markets.

For large financial institutions, the worst news came in the form of a report in The Wall Street Journal which stated that the U.S. Federal Reserve is expected to sign on to the Basel III capital requirements. The stricter framework will require large banks to hold more reserve capital and disclose more data in order to mitigate systemic risk .

"To enable market participants to compare the capital adequacy of banks across jurisdictions, it is essential that banks disclose the full list of capital items and regulatory adjustments," the Basel Committee on Banking Supervision wrote in a recent report .

JPMorgan Chase ( JPM ), which according to the WSJ may have to hold back an extra 2.5 percent of its capital as a share of its risk-weighted assets, declined 3.73 percent to $30.70 per share. Bank of America ( BAC ) fell over 4 percent to just $4.99 per share, while Citigroup ( C ) declined 4.85 percent to $24.82 per share.

Still, the banks have some time to prepare - the new rules won't really go into effect until 2016.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Banking Stocks