Healthier but Constrained: Are Post-Crisis Prudential Regulations Holding Back Capital Markets?

The U.S. economy has recovered well since the crisis, and the largest U.S. banks are well capitalized and post healthy balance sheets. While healthier, banks – the G-SIBs in particular – now have to navigate a spider web of regulations. We wonder how much stronger the economy could be if banks had the flexibility to release more capital and liquidity into the economy?

SIFMA Insights_CCAR Firms CET1 Ratio 260bps

Source: Bloomberg, company reports, SIFMA estimates
Note: Some firms experienced one-time declines in CET1 in 4Q17 due to the tax reform bill. 7.0% (= 4.5% minimum + 2.5% capital conservation buffer). Please see Appendix for G-SIB surcharges by bank.

SIFMA Insights_Liquidity Built Up Since the Crisis

Source: Bloomberg, company reports, SIFMA estimates
Note: Liquidity = (cash + deposits at banks) / total assets

Credits

SIFMA Insights

Katie Kolchin, CFA
Senior Industry Analyst

Office of the General Counsel

Carter McDowell
Managing Director and Associate General Counsel