Risk Quantum/Federal Reserve
Giant US banks outgrew smaller rivals in Q1
Banks over $10 billion in size also saw Tier 1 leverage ratios fall furthest
Interest rate swaps powered Q1 derivatives boom at top US banks
Rate derivatives notionals increase 22% quarter-on-quarter
Cash flood expanded systemic footprint of top US banks
Intra-system liabilities up 26% in Q1
Systemic riskiness of top US banks increased in Q1
JP Morgan’s systemic risk score increased enough to attract a 4% capital surcharge
EU banks’ liquidity buffers weathered Covid turmoil
Central bank cash reserves edge up across EU lenders
Covid tumult pushed VAR capital charges up 72% at US G-Sibs
JP Morgan’s charge increases 148% quarter-on-quarter
US banks’ leverage soared in Q1 before Fed’s reprieve
JP Morgan alone saw leverage exposure climb $112 billion
Covid loan losses exceed 2019 CCAR projections
CECL accounting likely responsible for discrepancy
Fed dominated MMF repo trades in March
FICC and BNP Paribas among other top repo counterparties
Wells Fargo loan book swells $48bn in Q1
San Francisco-based bank clears space on balance sheet for increased lending
How the Fed’s asset cap changed Wells Fargo
Lender has expanded repo book and cut cash since Q4 2017
Left out of Fed action, lower-rated CMBS overheat
BBB yield-to-worst spirals as highly-rated bonds recover after central bank and government intervention
Fed’s leverage ratio relief puts foreign banks on the back foot
European banks cannot – yet – exempt US Treasuries from their exposure measures