On Monday, September 9th, Eastern Time, news emerged of a significant reduction in capital requirements for the U.S. banking industry.

According to Bloomberg, after regulators agreed to carry out comprehensive modifications to the proposed rules, the capital increase requirements for large U.S. banks are expected to decrease to 9%, a substantial discount compared to the original plan.

In July last year, according to the new banking regulatory proposal issued by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), banks with assets exceeding $100 billion must increase their capital by approximately 16%; among them, eight U.S. banks of global systemic importance including JPMorgan, Bank of America, Citigroup, Wells Fargo & Co, Goldman Sachs, and Morgan Stanley are required to increase their capital by 19% to cushion against unexpected losses and financial shocks.

According to Bloomberg, the substantial reduction in capital requirements is more likely to appease the banks. After the proposal was put forward in July last year, the banking industry launched an unprecedented lobbying campaign. Furthermore, the revised new plan may also help Federal Reserve Chairman Powell achieve internal broad support within the Federal Reserve. Powell has previously made it clear to the banks that he also hopes to avoid a prolonged legal battle.

On Monday, large U.S. banks collectively rose by more than 2%. $JPMorgan (JPM.US)$ Rising by over 2%. $Bank of America (BAC.US)$Please use your Futubull account to access the feature.$Goldman Sachs (GS.US)$, $Morgan Stanley (MS.US)$ Up nearly 2%. $Wells Fargo & Co (WFC.US)$ Rising over 1%. Today, before the market opens, bank stocks in the US continue to rise, with Wells Fargo & Co up over 3%, Bank of America and JPMorgan up over 1%.

The original plan was strongly opposed by the US banking industry.

On July 27th of last year, the U.S. banking regulatory authorities announced a series of reforms for the banking industry, the so-called U.S. version of 'Basel III' 'final' rules, including raising capital requirements for large banks, aimed at enhancing the financial system's resilience to risks.

According to last year's plan, large banks with total assets exceeding $100 billion must increase their capital by around 16%, especially for the eight largest banks in the USA, the capital requirement is to be increased by around 19%. This means that these banks need to reserve more funds for contingencies, and cannot be used for other loans or investment activities. Furthermore, last year's new capital requirements not only apply to the largest banks, the applicable threshold has been lowered from a minimum of $250 billion in assets to $100 billion, which means that more banks in the U.S. region are also included.

As a result, after the plan was passed, there have been many dissatisfied views within the banking industry, believing that the new regulations may increase additional burden on the banking industry during unstable periods in the U.S. economy, especially it may raise customer costs, suppress lending activities, and even lead to some banks exiting the market.

The reason why banks are resistant to the capital requirements is that these regulations typically restrict their lending capacity, which may lead to reduced profitability. For example, when banks are dealing with market volatility and uncertainty, they often need to obtain more capital to meet regulatory requirements, which undoubtedly poses a challenge to their market competitiveness.

Many banks criticize the current capital rules, believing that the new regulations may lead to more complex compliance burdens, and even affect the overall stability of the financial system. They believe that these proposals are designed to enhance the capital structure of banks and their ability to defend against potential future financial crises, but they also have raised concerns about the short-term economic impact and increased industry burdens.

Therefore, if this amendment is passed, the policy concessions for the Wall Street banks will be a huge victory. Last weekend, according to Bloomberg's sources, these extensive 450-page revisions could be announced as early as September 19th, and will reshape the key components of the U.S. banking capital regime, known as the 'endgame' of Basel III in the U.S.

In recent months, U.S. regulatory authorities have been working on modifying the plan to significantly reduce the impact of capital on large banks. In June of this year, there were reports that the Federal Reserve was considering modifying the new banking regulatory plan to reduce the capital increase from the original 16% minimum to 5%.

At a closed-door meeting in July, Powell encouraged CEOs of U.S. big banks like JPMorgan to cooperate with the Federal Reserve, urging them to submit questions to the Fed to avoid future litigation, and hinted that the Fed may act independently of other regulatory authorities in announcing modifications to the new regulatory plan. In addition, during the U.S. Congress hearing on the Federal Reserve's semi-annual monetary policy report in July, Powell told lawmakers that the U.S. has made 'considerable progress' in making adjustments to the rules based on the Basel agreements and that regulatory authorities are 'very close' to making decisions regarding the final revised version of the new regulatory plan.

降息周期下，银行股有望获益

金融行业在降息周期中蕴含着巨大的投资机会。降息政策直接降低了金融机构的资金成本，拓宽了利润空间。银行可以以更低的利率获取资金，然后以较高的利率贷出，从而增加利差收入。

$KBW Nasdaq Bank Index (.BKX.US)$ 昨日涨近2%，年内累涨超16%，同期 $S&P 500 Index (.SPX.US)$ 升幅不到15%。

随着宏观经济、监管环境和银行自身盈利能力的改善，华尔街机构普遍看好银行股的未来表现，特别是那些能够积极管理资本和抓住市场机遇的银行。花旗集团的美国股票策略师Scott Chronert认为，银行估值较为合理，且受关税影响有限，美联储立场转鸽派将利于银行业。

富国银行表示，在经济软着陆与预期降息的情况下，银行股有望反弹，且跑赢基准指数。该行分析称，以史为鉴，在没有出现经济衰退情况下的降息对银行股向来是有利的。比如，1995年、1998年、2019年，降息都刺激了美股银行股上升。在经济软着陆背景下，美股银行股在首次降息后的季度涨幅，会超出标普500指数近10%。

According to Wells Fargo & Co, the investment window for the rebound in bank stocks is mainly concentrated in the first quarter after the first interest rate cut. In 7 out of the past 8 interest rate cut cycles, bank stocks have lagged behind the S&P 500 index in performance from 3 to 12 months after the first interest rate cut. Therefore, the bank's analyst team emphasizes that investors need to act quickly in order to seize the profit opportunities in the early stages of the interest rate cut. However, the bank also warns that if the interest rate cut is accompanied by a recession, the prospects for bank stocks will not be optimistic.

Betsy Graseck of Morgan Stanley emphasizes that the steady profitability of banks and the recovery of capital market activities are key factors driving stock price increases, especially the shift from headwinds to tailwinds in net interest income, providing momentum for performance growth in the second half of the year and 2025. He is particularly bullish on Citigroup, JPMorgan, and Wells Fargo & Co, expecting these banks to accelerate share buybacks and increase revenue.

In addition, investors are also betting that regional bank stocks may catch up due to the rate cuts by the Federal Reserve, as the rate cuts provide much-needed relief for regional banks that have been struggling.

Ed Yardeni, Chief Market Strategist at Yardeni Research, said: Going forward, the gradual rate cuts by the Federal Reserve over the next six months would be really helpful for banks with quite poor credit quality. As a result, there might be a catch-up trade in regional bank stocks.

Market analysis generally points out that after two years of tightening policies, the Federal Reserve's monetary policy is expected to shift to easing, which is expected to significantly alleviate the operational pressure on US banks, especially regional banks. These banks have been striving to overcome the adverse effects of the high interest rate environment on their profits and borrowers. With the strengthening of expectations for interest rate cuts, regional banks are expected to reduce their funding costs, as the decrease in deposit interest rates will directly increase bank profit margins.

How to seize investment opportunities in the banking sector?

In order to save time and energy in stock selection and capture the opportunity of the overall rise of the banking industry, investors can consider investing in bank sector exchange-traded funds (ETFs) while selecting individual bank stocks, so as to conveniently follow the upward trend of the entire industry.

For large U.S. banks, investors can choose large-scale financial industry ETFs. Among them, the largest industry ETF is$Financial Select Sector SPDR Fund (XLF.US)$This year's cumulative increase exceeds 20%, the top ten holdings include JPMorgan, Bank of America, Wells Fargo & Co, and Goldman Sachs.$Vanguard Financials ETF (VFH.US)$Please use your Futubull account to access the feature.$Ishares U.S. Financial Etf (IYF.US)$ The annual increase is around 20%.

If investors are interested in regional bank stocks, they can pay attention.$Spdr Series Trust S&P Regional Bkg Etf (KRE.US)$Please use your Futubull account to access the feature.$Spdr S&P Bank Etf (KBE.US)$ According to documents filed with the U.S. Securities and Exchange Commission (SEC), some of the most prominent actions Third Point took in the second quarter, respectively, were to establish positions, shareholding of and more.

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Editor / jayden