Underwriting activity of US G-Sibs topped $3 trillion in Q3

Systemic US banks underwrote $3.16 trillion of debt and equity in the 12 months to end-September, an increase of 41% on the year prior.

However, the rate of growth declined sharply over Q3. The quarter-on-quarter change in total underwriting was 8%, compared with 15% between Q1 and Q2.

JP Morgan has underwritten the most over this period, accounting for $693.4 billion, an increase of 43% on the 12 months ending September 30, 2019.


Goldman Sachs conducted the most equity underwriting by value, with transactions totalling $98.5 billion, a 69% rise on the year prior. JP Morgan led on debt underwriting, with $610.3 billion, up 41% year-on-year.

Percentage-wise, BNY Mellon has increased underwriting the most of the group, by over 500% to $43.6 billion.


What is it?

Underwriting activity is one indicator of systemic risk top banks have to report in FR Y-15 filings with the Federal Reserve. Banks have to disclose each quarter the total amount of public and private debt and equity underwriting over the last four quarters where they were obligated to buy up all unsold securities.

Why it matters

Underwriting fees have powered Wall Street earnings through the pandemic. Once the Federal Reserve steadied corporate bond markets by pledging to buy up investment-grade securities early on in the crisis, large corporates took advantage to sell new, long-term debt in record amounts, with the largest lenders benefitting the most.

The proceeds were put to use paying back short-term, variable-rate loans these firms had taken from their banks at the outset of the crisis. In doing so, corporates put their credit on a sounder footing. Redeeming these loans also helped the banks, by freeing up balance sheet for use pursuing other activities. 

Underwriting activity is a systemic risk indicator under the Basel Committee’s G-Sib methodology, but isn’t under the Fed approach. As the Fed method is the one that binds US banks, Wall Street’s giants can ratchet up underwriting activity without fear doing so could bump up their systemic risk scores, or capital surcharges.

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