Market Commentary

Why Bank Stocks are Falling this Week

November’s inflation number

Why Bank Stocks are Falling this Week… It is all about the FED. The banks had an exemption that let them exclude Treasury’s and deposits with the central bank from the calculation. A key bank capital measure called the’ supplementary leverage’. They are going to let that exemption expire on March 31st.

After the last bank crisis in 2008, the FED required more infusion of capital so banks can withstand the next crisis when it came. Of course, the recent covid economic shut down was the crisis and most banks sailed through without any difficulty and one reason was the suspicion of this capital requirement.  Now banks will have to become more conservative again and meet this rule, and that means less capital for them to invest. Instead, they have to keep it on the books as assets.

Less profit, less interest in buying and holding bank stocks.