Wall Street banks with large trading units may be biggest winners under US capital plan

A U.S. proposal to reduce required capital for banks would cut industry capital burdens, with firms that have large trading operations set to benefit more than traditional lenders. The uneven impact could create lobbying and negotiation conflicts among Wall Street banks as final revisions are sought. For investors, expect relative upside potential for trading-heavy banks (higher ROE/EPS leverage from lower capital) and increased idiosyncratic regulatory risk during the rule-making process.

Analysis

A U.S. proposal to reduce required capital for banks would cut industry capital burdens, with firms that have large trading operations set to benefit more than traditional lenders. The uneven impact could create lobbying and negotiation conflicts among Wall Street banks as final revisions are sought. For investors, expect relative upside potential for trading-heavy banks (higher ROE/EPS leverage from lower capital) and increased idiosyncratic regulatory risk during the rule-making process.