The Downside Of Future Deregulation For Banks

Wall Street

Wall Street already called on president-elect Donald Trump to not kill Dodd-Frank entirely, and now another consequence of financial deregulation is on the table: stricter borrowing limits.

Some of Trump’s closest advisors say banks should be required to maintain higher capital in return for rolling back regulations, the Wall Street Journal reports. Increased capital could act as a cushion against losses, while stricter borrowing rules would help ensure banks don’t experience a repeat of the 2008 crisis and bailouts. Still, critics persist that more limits on borrowing and capital mandates would hurt economic activity.

A higher leverage ratio would certainly be costly for banks, with one Barclays analyst saying JP Morgan Chase alone would need to boost its equity by $107B, or 40%, to maintain a 10% leverage ratio. [WSJ]

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