Megabanks Bear Brunt in Revised Fed Counterparty Plan
By John Heltman
WASHINGTON — The Federal Reserve Board unanimously voted to release a proposal Friday to limit the exposures between systemically risky bank holding companies in a move that reflects not only an evolution in the agency’s finesse but a change in the pressures it is facing. The plan replaces a similar proposal issued in 2011 that featured a two-tiered standard with one affecting all banks with more than $50 billion in assets and another for banks with $500 billion or more in assets. Karen Shaw Petrou, managing partner at Federal Financial Analytics, said the change between the 2011 proposal and Friday’s reflects in part increasing pressure from the industry and Congress to tailor regulations to reflect the systemic risk an institution poses — a philosophy that the Fed has repeatedly said it embraces. The proposal also shows the agency’s fixation on reducing the risks posed by the biggest of the big banks, she said. “The new proposal shows clearly the Fed’s recognition of the political pressures to tailor its rules for smaller bank holding companies, but also its determination to shrink any systemic footprint it thinks may still be left from the biggest U.S. banks,” Petrou said.