Boston, MA 10/14/2014 (wallstreetpr) – After the financial turmoil in 2008 and 2009, the regulators have become a little demanding to ensure that the financial institutions stay in line with the norms. This meant that even big banks such as JPMorgan Chase & Co. (NYSE:JPM) would have to lift their exposure towards debt securities as a safety net to cover losses in case of any unexpected collapse. The company was one among the list of banks to increase capital to match with the prescribed norms in relation to the weighted assets.
Capital To Be Raised
The lesson learnt by the sudden collapse of Lehman Brothers Holdings Inc. still remained fresh among the regulator to remain watchful. The Financial Stability Board or FSB has provided guidelines for a different kind of possibilities for the amount that the lenders needed to keep as minimum risk-weighted assets, Bloomberg reported. The report said that even a small change in assumption could lead to big numbers.
In a note to clients, Barclays analysts said that JPMorgan was one of the companies that needed to raise capital to attain 18% of risk-weighted assets since it falls short of the norms currently. Another company, Wells Fargo & Co (NYSE:WFC), also figured in the list of companies needing to raise capital. Both JPMorgan and Wells Fargo would have to raise about $127 billion to match the norms prescribed in relation to risk-weighted assets.
Overall Shortfall
The overall shortfall that lenders facing were valued around $870 billion based on AllianceBernstein Ltd. estimations. However, Barclays Plc expects only $237 billion as shortfall.
The FSB would also be presenting its draft regulations to G-20 summit in Australia next month. Its plan called for the world’s 27 biggest banks to keep loss-absorbing debt and equity equal to 16% – 20% of their risk-weighted assets in case the banks failed unexpectedly. The move was meant to ensure that the establishment should not touch taxpayers’ money to retrieve them. Instead, the plan called for ensuring investors to take the bill in case a lender collapse suddenly.
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