Wall Street's Capital Rules Revisited: JPMorgan vs. GSIBs

Wall Street's biggest banks are at odds over a tweak in capital rules that could cost them billions of dollars. The Federal Reserve is finalizing an overhaul of capital requirements, and JPMorgan Chase, Bank of America, Goldman Sachs, and Morgan Stanley are feuding over how the rules will be changed.

The proposed change would revise how banks treat short-term wholesale funding, such as repo and commercial paper, which regulators say can dry up during market stress. This tweak would benefit Goldman Sachs and Morgan Stanley more than JPMorgan Chase and Bank of America, as they rely more heavily on short-term funding.

JPMorgan estimated in a letter to the Fed that it would miss out on $13 billion in capital relief due to this change, while BofA would lose $9 billion. Goldman Sachs and Morgan Stanley, however, could gain an additional $1 billion to $2 billion each in capital relief.

The banks are lobbying Fed officials to spike the proposed change, arguing that it could crimp lending and potentially hurt the economy. The Fed's Vice Chair for Supervision, Michelle Bowman, has told banks to limit feedback, suggesting she may stick to the current draft.