According to Zhizhong Finance APP, Deutsche Bank indicated that the rebound of us bank stocks since the end of September may force several of the largest banks in the usa to further reduce their activity in repurchase agreements or the forex derivatives market.

The stock prices of banks are used to calculate part of the regulatory scores for global systemically important banks (GSIBs), and the assessment will be conducted at the end of the year to determine the banks' surcharges, that is, the amount of capital banks need to retain on their balance sheets. The higher the regulatory score, the more cash banks need to hold. Banks tend to cut back on derivatives and repurchase market activities to lower potential scores before the year's end.

Deutsche Bank strategists, including Steven Zeng, stated: "For banks with GSIB indicators that have increased over the year, the pressure to reduce year-end activities may be the most severe, as they face the risk of surcharges rising in the coming years."

Based on the closing prices on November 21, the scores of five global systemically important banks with significant brokerage businesses could rise by 2.5 to 6.6 points.

The regulatory surcharges for major banks in the usa are expected to rise.

Deutsche Bank estimates that these large banks need to reduce $95 billion in buyback activities or $290 billion in forex activities to fully offset the impact of rising stock prices on their regulatory scores.

In recent weeks, year-end overnight repurchase rates (i.e., loans collateralized by US Treasury securities) and mortgage-backed securities rates have soared. Part of the reason is the surge in repurchase volumes on September 30. At the same time, the recent surge in the US stock market has increased the demand for repurchases collateralized by stocks, further exacerbating the liquidity crunch. Wall Street is preparing for greater volatility on the last trading day of 2024.

Deutsche Bank stated that more than half of the eight global systemically important banks may face pressure, with JPMorgan (JPM.US) and Bank of America (BAC.US) already facing higher surcharges according to estimated scores for the third quarter. Goldman Sachs (GS.US), Morgan Stanley (MS.US), and Citigroup (C.US) are all close to the surcharge cap corresponding to their scores.

JPMorgan's estimated GSIB score for the third quarter has risen by 160 points since last year, and if the score remains unchanged by the end of this year, the bank will face a maximum surcharge of 5.5%. Deutsche Bank stated that to cope with a surcharge increase of 50 basis points, JPMorgan would need to reduce at least $160 billion in repurchase activities.

Last month, JPMorgan CEO Jamie Dimon admitted that the bank "will have a trillion dollars in cash but cannot fully deploy it in the Treasury or repurchase market," because it needs to keep this cash with the Federal Reserve.