Wall Street Banks Turn on Each Other Over Trillion-Dollar Capital Rule Tweak

Wall Street's most powerful banks are feuding over a tweak in capital rules that could affect billions of dollars. The Federal Reserve is finalizing an overhaul of capital requirements, but JPMorgan and Bank of America are pushing back against a proposed change to the global systemically important U.S. banks (GSIBs) surcharge.

The Fed's proposal would revise how it treats short-term wholesale funding, such as repo and commercial paper, which regulators say is prone to drying up during market stress. However, JPMorgan and BofA executives are concerned that this change would benefit their rivals Goldman Sachs and Morgan Stanley, which rely more heavily on short-term wholesale funding.

JPMorgan estimated in a June letter to the Fed that it would miss out on $13 billion in extra capital relief due to the funding tweak, while BofA would miss out on $9 billion. In contrast, Goldman and Morgan Stanley would both realize an additional $1 billion to $2 billion in relief.

The divergence has sparked last-minute infighting among the Wall Street giants, potentially complicating the Fed's effort to finalize the reforms before next year when Democrats are expected to have control of the House of Representatives and intensify oversight of Trump's regulators.