Risk Quantum/Federal Reserve
Deposits boosted top US banks’ short-term funds in 2020
Unsecured funding from outside the financial sector increased 22% to $934.6 billion
Five US systemic banks face higher G-Sib surcharges
JP Morgan to face 4% add-on; Wells Fargo a cut to 1.5%
At big US banks, Treasury holdings grew over $350bn in 2020
US debt held-to-maturity increased 92% over the year
Top US banks saw liquid assets grow over $500bn in 2020
JP Morgan saw HQLAs increase 28% year on year
Repo exposures fell at BofA, surged at JP Morgan in Q4
Bank of America’s SLR improved to 7.2% by end-December
In light of Covid recession, Fed eases stress test scenario
Real GDP projected to fall 4%. In 2020, the simulated drop was 8.5%
JP Morgan calls for SLR relief to be made permanent
Around 16% of the bank’s exposures were excluded from the ratio in Q4
SOFR trading surged at year end
End-2020 volume and rate spike was muted compared to previous years
Smaller US banks grew faster than larger rivals in Q3
Lenders less than $1 billion in size increased loans 16% over the quarter
Regional banks, FBOs found second round of Fed tests tougher
DB, HSBC, PNC, US Bancorp and TD Group saw their peak-to-trough CET1 ratio depletion increase most
Fed’s Covid stress tests strain top banks’ leverage ratios
Citi, Goldman, JP Morgan, Morgan Stanley all had projected post-stress SLRs below 5%
Having cut risk, Wells Fargo may win a lower G-Sib surcharge
The San Francisco-based bank has lowered its systemic risk score through 2020
Many US banks want to curb Fed balances
Of those wanting to shrink excess reserves, a large percentage cite fears over net interest margins