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    Why substituting cryptocurrency for gold exposure may be a costly mistake

    Viewing cryptocurrency as “digital gold” may be a mistake.
    State Street Global Advisors’ George Milling-Stanley, whose firm runs the world’s largest gold exchange-traded fund, believes cryptocurrency is no substitute for the real thing due its vulnerability to big losses.

    “Volatility does not back up any claims for crypto to be a long-term strategic asset as a competitor to gold,” the firm’s chief gold strategist told CNBC’s “ETF Edge” earlier this week.
    Milling-Stanley’s firm is behind SPDR Gold Shares, the world’s largest physically backed gold ETF. It has a total asset value of more than $57 billion as of last week, according to the company’s website. The ETF is up 7% year to date as of Friday’s market close.
    Milling-Stanley believes gold’s 6,000-year history as a monetary asset serves as a significant sample basis to understand the benefits of investing in gold.
    “Gold is a hedge against inflation. Gold’s a hedge against potential weakness in the equity market. Gold’s a hedge against potential weakness in the dollar,” he noted. “To me, historically, the promise of gold for investors has … overtime [helped] to enhance the returns of a properly balanced portfolio.”
    The precious metal is having trouble this year staying above the $2,000 an ounce mark. But Milling-Stanley believes the economic backdrop bodes well for gold — recession or not.

    “It’s pretty clear that we’re liable to be in a period of slow growth. … Historically, gold has always done well during periods of slower growth,” Milling-Stanley said.
    Milling-Stanley also believes the relaxation of Covid-19 restrictions in China should spark more demand for gold. It’s known as the world’s largest consumer of gold jewelry behind India, according to the World Gold Council.
    “It’s not just China and India. It’s Vietnam, it’s Indonesia, it’s Thailand and Korea. It’s a whole raft of Asian countries that are really the main drivers of gold jewelry demand,” Milling-Stanley said.
    Gold settled at $1,960.47 an ounce Friday. The commodity is up more than 7% so far this year.

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    Stocks making the biggest moves midday: Intel, Roku, Sweetgreen, Ford and more

    Signage outside Intel headquarters in Santa Clara, California, Jan. 30, 2023.
    David Paul Morris | Bloomberg | Getty Images

    Check out the companies making headlines in midday trading. 
    Intel — The chip stock jumped more than 6% after the company posted better-than-expected second-quarter earnings results. The latest quarter marked a return to profitability after two consecutive losing periods. Intel’s forecast for the third quarter also came in above analyst expectations.

    Roku — Shares popped 31% after the company reported a smaller-than-expected loss for the recent quarter. The streaming stock posted a loss of 76 cents a share, ahead of the $1.26 loss per share expected by analysts, according to Refinitiv. Revenue came in at $847 million versus the estimated $775 million.
    New York Community Bancorp — The regional bank stock added 4.9% after JPMorgan upgraded shares to overweight from neutral, calling it a “massive market share taker” in the near and medium term.
    Biogen — The biotech company rose nearly 1% after the company said it’s acquiring Reata Pharmaceuticals for $172.50 per share, in a cash deal valued at about $7.3 billion. Shares of Reata popped 54% following the news.
    Procter & Gamble — The consumer giant’s stock climbed nearly 3%, boosting the blue-chip Dow Jones Industrial Average. The rally came after the company reported quarterly earnings and revenue that beat analysts’ expectations. P&G did release a gloomy outlook for its fiscal 2024 sales that fell short of Wall Street estimates, however.
    Exxon Mobil — The oil giant saw its shares dip 1.2% after the company posted mixed second-quarter results. The company reported earnings of $1.94 a share, excluding items, lower than the $2.01 estimate by analysts, per Refinitiv. Revenue came in at $82.91 billion, above the expected $80.19 billion.

    Enphase Energy — The solar stock dropped nearly 7% to hit a 52-week low after the company posted a revenue miss. Enphase said its second-quarter revenue reached $711 million, falling short of analyst estimates of $722 million, according to Refinitiv. Deutsche Bank, Wells Fargo and Roth MKM downgraded the stock following the disappointing report.
    Boston Beer — The alcohol beverage company saw its shares soar more than 16% following a stronger-than-expected quarterly report. Boston Beer posted earnings of $4.72 per share, well above an estimate of $3.38 per share from FactSet. Its revenue also came in above expectations.
    Sweetgreen — Shares of the salad chain slid nearly 9% after the company posted weak sales that missed Wall Street expectations in the second quarter and a net loss of $27.3 million, or 24 cents per share. Sweetgreen also reported narrowing losses and raised its forecast for restaurant-level margins. It’s aiming to turn a profit for the first time by 2024.
    Ford Motor — The automaker saw shares fall more than 3% after it said the adoption of electric vehicles is going more slowly than expected and that it expects to lose $4.5 billion on the EV business this year, widening losses from roughly $3 billion a year earlier. Otherwise, Ford posted strong quarterly earnings that beat Wall Street expectations and raised its full-year guidance.
    T. Rowe Price — Shares of the asset manager jumped more than 8% after T. Rowe Price reported stronger-than-expected earnings for the second quarter. The company earned an adjusted $2.02 per share on $1.61 billion of revenue. Analysts surveyed by Refinitiv were expecting $1.73 per share on $1.6 billion of revenue. CEO Rob Sharps said in a press release that T. Rowe Price has “identified substantial cost savings” that will slow expense growth going forward.
    — CNBC’s Jesse Pound, Tanaya Macheel and Samantha Subin contributed reporting.
    Correction: T. Rowe Price earned an adjusted $2.02 per share. A previous version misstated the figure. More

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    $20 an hour, clothing stipend, meals: How a Big Four firm is trying to get teens interested in accounting

    Life Changes

    KPMG is offering high school interns $20-$22 an hour to encourage more teenagers to consider a career in accounting and help fix the talent pipeline problem.
    Nationwide, accounting firms are facing a significant staffing shortage.
    The profession’s lack of diversity is one of the reasons the industry has failed to attract young talent, studies show.

    KPMG is offering high schoolers paid internships to help fix accounting’s staffing shortage.

    By her own admission, Autumn Kimborough, 17, didn’t have a passion for accounting. But the rising high school senior from Flossmoor, Illinois, heard about a well-paid summer internship at KPMG, which included a $250 clothing stipend, and got excited.
    For the first time, the Big Four accounting firm organized a three-week session geared toward high schoolers with the specific goal of encouraging younger adults to consider a career in the field, according to Jennifer Flynn, KPMG’s community impact lead.

    Nearly 200 teenagers are participating in the summer internship program, which pays $20 or $22 an hour plus clothing and transportation stipends and meals, and includes a business etiquette class, among other skill-building tools.
    More from Personal Finance:This strategy could shave thousands off the cost of collegeHow to understand your financial aid offerThe cheapest states for in-state college tuition
    Students are also paired with mentors who track their progress. “We wanted to make sure our interns are getting a really full experience,” Flynn said.
    “I had some preconceived notions that it’s sitting at a desk,” Kimborough said, about being a CPA. “Now I’ve learned that with accounting you can travel and meet people and that drew me in.”

    Accounting firms face a shortage of CPAs

    Accounting firms have been facing a significant staffing shortage.

    Between the long hours, stressful deadlines and unflattering stereotype, more people are quitting the profession than going into it.
    Instead, students straight out of college are choosing to pursue careers in related fields such as investment banking, consulting or data analysis. The additional credit hours required to earn a certified public accountant license don’t help either.
    To tap the next generation of number crunchers, other accounting firms and nonprofit groups are also trying new strategies to address the talent pipeline problem by appealing directly to teenagers.

    Recently, The Deloitte Foundation, Urban Assembly and Outlier.org, which works with schools to offer for-credit online college courses, kicked off a dual enrollment pilot program in New York.
    Starting in the fall, some public high school juniors and seniors can take an Intro to Financial Accounting class and earn three college credits through the University of Pittsburgh, which they can then transfer to the college of their choice.
    The goal is also to inspire more diverse students to consider accounting careers.

    This isn’t the sexiest of professions.

    Elena Richards
    KPMG’s chief diversity, equity and inclusion officer

    “We know this isn’t the sexiest of professions,” said KPMG’s chief diversity, equity and inclusion officer Elena Richards. “We are really trying to focus on starting earlier and broadening the reach.”
    “This is our way of getting them to know this is a profession that has a lot of opportunities.”
    The profession’s lack of diversity is another reason the industry has failed to attract young talent, separate studies show. Just 2% of CPAs are Black and 5% are Hispanic despite significant job opportunities in the field, according to a recent AICPA Trends Report.
    Accounting often ranks among the top jobs with the best future outlook and six-figure salaries, according to other reports.
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    Stocks making the biggest moves premarket: Intel, Roku, Procter & Gamble and more

    Signage outside Intel headquarters in Santa Clara, California, on Monday, Jan. 30, 2023.
    David Paul Morris | Bloomberg | Getty Images

    Check out the companies making headlines before the bell.
    Intel — Shares popped 6.7% after the chipmaker posted better-than-expected second-quarter results and a return to profitability after two consecutive losing periods. Intel’s forecast for the third quarter also came in above analyst expectations. The company reported adjusted earnings of 13 cents a share on revenues of $12.95 billion.

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    Roku — The streaming stock rallied nearly 10% after reporting a narrower-than-expected loss for the second quarter. Roku reported a loss of 76 cents a share and revenues of $847 million. Analysts polled by Refinitiv had anticipated a loss of $1.26 per share and $775 million in revenue.
    Biogen — Biogen shares moved slightly lower after the biotechnology company said it’s acquiring Reata Pharmaceuticals for $172.50 per share, in a cash deal valued at about $7.3 billion. Shares of Reata soared more than 51% on the news.
    Procter & Gamble — The consumer giant saw shares rise more than 1% in premarket trading after the company reported quarterly earnings and revenue that beat analysts’ expectations. However, P&G released a gloomy outlook for its fiscal 2024 sales that fell short of Wall Street’s estimates.
    Exxon Mobil — Shares moved slightly lower after the oil stock posted mixed second-quarter results. The company reported earnings of $1.94 a share, excluding items, that fell short of the $2.01 expected by analysts, per Refinitiv. Revenues came in at $82.91 billion, above the expected $80.19 billion.
    Chevron — The oil stock lost nearly 1% even after reporting a beat on the top and bottom lines for the second quarter. Earnings fell from a year ago due to a drop in oil prices.

    First Solar – Shares soared 12% after the solar company posted earnings per share of $1.59 on revenue of $811 million for the second quarter. Those results beat Wall Street expectations of 96 cents per share on revenue of $721 million, according to Refinitiv. The company also announced plans to invest up to $1.1 billion to build a fifth manufacturing facility in the United States.
    Enphase Energy – Shares of Enphase dropped more than 15% after the company posted second-quarter revenue Thursday of $711 million that fell short of analyst estimates of $722 million, according to Refinitiv. The stock also faced a wave of downgrades Friday morning from Deutsche Bank, Wells Fargo and Roth MKM.Sweetgreen – Shares of the salad chain slid more than 13% after the company posted weak sales that missed Wall Street expectations in the second quarter and a net loss of $27.3 million, or 24 cents per share. Sweetgreen did say it’s aiming to turn a profit for the first time by 2024.Ford Motor – The automaker said adoption of electric vehicles is going more slowly than the company forecast and that it expects to lose $4.5 billion on the EV business this year, widening losses from roughly $3 billion a year earlier. Otherwise, Ford posted strong quarterly earnings that beat Wall Street expectations and raised its full-year guidance. Shares were flat in premarket trading.
    Juniper Networks — Shares of the technology company fell 8% after Juniper’s third-quarter guidance came in lighter than expected. The company said it expects earnings per share between 49 cents and 59 cents, with revenue between $1.34 billion and $1.44 billion. Analysts had penciled in 62 cents per share and $1.48 billion of revenue. The company’s second-quarter results did come in slightly above expectations.
    AstraZeneca — U.S. listed shares of the drugmaker added more than 5% before the bell. The U.K.-based company reported second-quarter earnings of $2.15 per share on $11.42 billion in revenue. That surpassed the EPS of $1.95 expected by analysts polled by Refinitiv on revenues of $11.03 billion. AstraZeneca also said it would buy a portfolio of preclinical rare disease gene therapies from Pfizer for up to $1 billion.
    Xpeng — The Chinese electric vehicle stock jumped more than 6% in the premarket. Jefferies upgraded shares to a buy from a hold, citing Xpeng’s joint development plan with Volkswagen
    New York Community Bancorp — The regional bank stock rose about 2% before the bell after JPMorgan upgraded New York Community Bancorp to an overweight rating from neutral. The Wall Street firm called the company a “massive market share taker” in its upgrade.
    Mondelez International — Mondelez International added 2.7% before the bell on strong second-quarter results. The snack maker on Thursday reported earnings of 76 cents a share, excluding items, on $8.51 billion in revenue. Analysts polled by Refinitiv had estimated EPS of 69 cents and revenues of $8.21 billion.
    — CNBC’s Tanaya Macheel, Yun Li and Jesse Pound contributed reporting More

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    The Bank of Japan jolts global markets

    On July 28th the Bank of Japan (boj) took markets by surprise. At the end of a two-day policy meeting Ueda Kazuo, the central bank’s governor, announced an unexpected change to its increasingly expensive policy of yield-curve control. The boj raised its cap on ten-year government-bond yields, which it defends with regular and sometimes vast purchases, from 0.5% to 1%. Ten-year yields climbed to around 0.57% after the announcement, the highest in nearly a decade. Surging inflation over the past two years has led central banks around the world to raise interest rates forcefully. Japan’s central bank has been a stubborn outlier, keeping most of its monetary-stimulus measures—including negative interest rates and aggressive bond purchases—firmly in place. All told, the boj’s ultra-low interest-rate regime, introduced in an attempt to boost the country’s sluggish rate of economic growth and prevent outright deflation, has now been active for a quarter of a century. Tweaking yield-curve control is not quite an abandonment of the regime. It does, however, set the country on course for higher rates.Under yield-curve control, the boj buys government bonds when yields approach the stated cap—pushing yields, which move inversely to bond prices, back down. The approach has been in place since 2016, when it was introduced as an alternative to huge asset purchases, which were distorting the bond market. In the past year the policy has come under pressure as inflation has soared worldwide. In January the boj was forced to make enormous bond purchases—surpassing ¥13trn ($100bn) in one week—in order to defend the policy. Hedge funds have short-sold government bonds, expecting that the boj eventually will have to abandon the policy. Every extra boj bond purchase increases eventual losses on the central bank’s portfolio should yields eventually rise. And with the boj owning vast amounts of government bonds, there are few left for others to trade, leaving the market increasingly illiquid. Most economists had therefore expected the boj to eventually junk or tweak the policy, though not until later in the year. The boj says that allowing a wider trading range will bring flexibility, allowing the bond market to function better, whichever way the economic winds blow. The central bank also said that it would be “nimbly conducting market operations” when the ten-year yield was between 0.5% and 1%. The central bank seems to be giving itself wriggle room to buy bonds, even if yields do not bump up against the new upper bound. In doing so, it risks causing confusion about its goals.Despite the boj’s insistence that the change to yield-curve control is not an act of monetary tightening, any loosening of the band inevitably means higher market interest rates, since yields were already bumping up against the previous cap. Even if the boj does not want to fire the starting gun on a cycle of tighter policy, the move is “effectively akin to a rate hike”, as Naohiko Baba of Goldman Sachs, a bank, has written.For now there are few advocates of more aggressive tightening at the boj. But rate rises no longer look as unlikely as they did. Based on the price of interest-rate swaps, investors expect short-term interest rates to rise from -0.1% now to zero in a year’s time. Data released on July 28th showed core inflation (excluding fresh food and fuel) in Tokyo rising by 4% year-on-year in July, twice the boj’s target. What happens in the labour market will be crucial. Signs of broader pressures on wages are still limited, but the shunto, springtime wage negotiations, saw promises of the largest wage rises in three decades. Years of ultra-low interest rates have left Japan exposed to higher interest rates, whether market or official ones. The most obvious source of risk is the country’s government debt, which on a net basis ran to a staggering 161% of gdp last year, and which will become much more expensive to service. Despite low borrowing costs in recent years, the government already spends 7.4% of its annual budget on interest payments—more than it does on defence, education or public infrastructure. Higher interest rates for any sustained period would put huge pressure on Japan’s fiscal arithmetic.Thus the BoJ faces a balancing act. Backing away from its yield-control policies without sending yields surging will require immaculate communication. If inflation fades as the boj hopes, officials may just pull it off. But if price pressures are more sticky and sustained, then painful monetary tightening will follow. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

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    China’s housing ministry is getting ‘bolder’ about real estate support

    China’s housing ministry has announced plans to make it easier for people to buy property.
    They include easing purchase restrictions for people wanting to buy a second house, and reducing down payment ratios for first-time homebuyers, according to an article on the Ministry of Housing and Urban-Rural Development’s website.
    “It seems to us that [the housing ministry] is quick in response this time and also gets bolder on relaxing property policies,” Jizhou Dong, China property research analyst at Nomura, said in a note Friday.

    A residential complex constructed by Evergrande in Huai’an, Jiangsu, China, on July 20, 2023.
    Future Publishing | Future Publishing | Getty Images

    BEIJING — China’s housing ministry has announced plans to make it easier for people to buy property.
    The news, out late Thursday, indicates how different levels of government are starting to act just days after Beijing signaled a shift away from its crackdown on real estate speculation.

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    14 hours ago

    The planned measures include easing purchase restrictions for people wanting to buy a second house, and reducing down payment ratios for first-time homebuyers, according to an article on the Ministry of Housing and Urban-Rural Development’s website.
    In an effort to reduce speculation in its massive property market, China has made it much harder for people to buy a second house.
    Mortgage rates for the second purchase can be a full percentage point higher than for the first, while the second-home down payment ratio can skyrocket to 70% or 80% in large cities, according to Natixis.

    The housing ministry article referred to comments from its minister Ni Hong at a recent meeting with eight state-owned and non-state-owned companies in construction and real estate.
    Since it was a meeting at the central government ministry level, it did not discuss policies for individual cities, said Bruce Pang, chief economist and head of research for Greater China at JLL.

    But he expects Beijing will encourage local governments to announce real estate policy changes that fit their specific situation. Pang also pointed out that including construction companies at the meeting emphasized their role in promoting investment and stabilizing growth.

    Waiting on details

    China has not yet announced formal measures for supporting real estate. However, top level leaders on Monday signaled a greater focus on housing demand, rather than supply.
    On Tuesday, China’s State Taxation Administration announced “guidelines” for waiving or reducing housing-related taxes. It was not immediately clear what implementation would look like for home buyers.

    We continue to expect the property sector rally to continue and advise investors to focus on beta names within the property sector.

    Jizhou Dong

    The readout of Monday’s Politburo meeting also removed the phrase “houses are for living in, not speculation,” which has been a mantra for Beijing’s tight stance and efforts to rein in developers’ high reliance on debt for growth.
    “It seems to us that [the housing ministry] is quick in response this time and also gets bolder on relaxing property policies,” Jizhou Dong, China property research analyst at Nomura, said in a note Friday.
    Given such speed, Dong expects markets are anticipating specific policy implementation in cities such as Shanghai or Guangzhou.

    Read more about China from CNBC Pro

    Hong Kong-traded Chinese property stocks such as Longfor, Country Garden and Greentown China traded higher Friday, on pace to close out the week with gains after plunging on Monday over debt worries.
    “We continue to expect the property sector rally to continue and advise investors to focus on beta names within the property sector,” Nomura’s Dong said.
    Those stocks include U.S.-listed Ke Holdings, as well as Hong Kong-listed Longfor and China Overseas Land and Investment, the report said, noting Nomura has a “buy” rating on all three.
    “We still advise investors to stay away from weaker privately-owned developers.” More

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    Stocks making the biggest moves after hours: Intel, Ford, Roku, Enphase Energy and more

    3,760 Enphase microinverters will power the drying and storage of more than 50,000 tons of California rice at Strain Ranches in Arbuckle, California, Feb. 19, 2013.
    Alison Yin | AP

    Check out the companies making headlines in extended trading.
    Intel — The technology stock jumped nearly 6% as investors cheered a return to profitability and better-than-expected guidance. Intel projected third-quarter adjusted earnings of 20 cents per share, compared with estimates of 16 cents per share, according to Refinitiv.

    Ford — The auto giant added 1% after raising full-year guidance and beating expectations for the second quarter. Ford reported 72 cents in adjusted earnings per share on $42.43 billion, while analysts surveyed by Refinitiv estimated 55 cents earned and $40.38 billion in revenue.
    Roku — Shares of the streamer advanced 8.5% following a better-than-expected quarterly report. The company lost 76 cents per share in the second quarter, a narrower loss than the consensus estimate of $1.26 compiled by Refinitiv. Roku’s revenue also came in better than anticipated, with the company posting $847 million against a $775 million estimate.
    First Solar — The solar stock gained 6.6% after solidly beating Wall Street expectations in the second quarter. First Solar earned $1.59 per share and saw $811 million in revenue, while analysts surveyed by Refinitiv anticipated 96 cents earned per share on $721 million of revenue.
    Enphase Energy — Enphase tumbled 12% after the solar stock gave a mixed financial report. The company said it earned $1.47 per share, adjusted, ahead of the $1.25 per share estimated by analysts, per Refinitiv. But revenue missed the consensus estimate by $11 million, coming in at $711 million.
    Sweetgreen — The salad chain slid 7% after missing revenue expectations for the second quarter. The company reported $153 million while analysts polled by Refinitiv forecast $157 million.

    Dexcom — The medical device stock rose 2% after delivering better quarterly earnings and forward guidance than Wall Street anticipated. The firm reported 34 cents earned per share, excluding items, on revenue of $871.3 million. Analysts polled by FactSet expected 23 cents per share and $841.2 million in revenue. Dexcom raised full-year revenue guidance to between $3.5 billion and $3.55 billion, while the average analyst predicted $3.5 billion.
    T-Mobile — The telecommunications stock shed 1.6% on a mixed earnings report for the second quarter. T-Mobile earned $1.86 per share, above the analyst consensus estimate of $1.69, per Refinitiv. But revenue came in weaker than expected, with T-Mobile reporting $19.2 billion despite Wall Street forecasting $19.31 billion.
    Boston Beer — Shares climbed 9% after the alcoholic beverage company reaffirmed guidance for the full year and gave a strong quarterly report. Boston Beer posted $4.72 in earnings per share on $603 million in revenue, while analysts polled by Refinitiv expected $3.43 per share and $593 million in revenue. More

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    Regulators unveil sweeping changes to capital rules for banks with $100 billion or more in assets

    U.S. regulators on Thursday unveiled a sweeping set of proposed changes to banks’ capital requirements to address evolving international standards and the recent regional banking crisis.
    While the heightened requirements apply to all banks with at least $100 billion in assets, the changes are expected to impact the biggest and most complex banks the most, the regulators said.

    Michael Barr (L), Vice Chair for Supervision at the Federal Reserve and Martin Gruenberg, Chair of the Federal Deposit Insurance Corporation (FDIC), testify about recent bank failures during a US Senate Committee on Banking, House and Urban Affairs hearing on Capitol Hill in Washington, DC, May 18, 2023. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)
    Saul Loeb | Afp | Getty Images

    U.S. regulators on Thursday unveiled a sweeping set of proposed changes to banks’ capital requirements to address evolving international standards and the recent regional banking crisis.
    The changes, designed to boost the accuracy and consistency of regulation, will revise rules tied to risky activities including lending, trading, valuing derivatives and operational risk, according to a notice from the Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.

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    Long expected by banks, the proposed rules seek to tighten regulation of the industry after two of its biggest crises in recent memory — the 2008 financial crisis, and the March upheaval in regional lenders. They incorporate parts of international banking regulations known as Basel III, which was agreed to after the 2008 crisis and has taken years to roll out.
    The changes will broadly raise the level of capital that banks need to maintain against possible losses, depending on each firm’s risk profile, the agencies said. While the heightened requirements apply to all banks with at least $100 billion in assets, the changes are expected to impact the biggest and most complex banks the most, they said.
    “Improvements in risk sensitivity and consistency introduced by the proposal are estimated to result in an aggregate 16% increase in common equity tier 1 capital requirements,” the regulators said in a fact sheet. Tier 1 common capital levels measure an institution’s presumed financial strength and its buffer against recessions or trading blowups.

    Long phase-in period

    Most banks already have enough capital to meet the requirements, the regulators said. They would have until July 2028 to fully comply with the changes, they said.
    The KBW Bank Index dipped less than 1% in midday trading; the index has fallen 11% this year.

    Further, in response to the failure of Silicon Valley Bank in March, the proposal would force more banks to include unrealized losses and gains from certain securities in their capital ratios, as well as compliance with additional leverage and capital rules.
    That effectively eliminates a regulatory loophole that regional banks enjoyed; while larger firms with at least $250 billion in assets had to include unrealized losses and gains on securities in their capital ratios, regional banks won a carve-out in 2019. That helped mask deterioration in SVB’s balance sheet until investors and customers sparked a deposit exodus in March.

    Higher standards

    The changes would also force banks to replace internal models for lending and operational risk with standardized requirements for all banks with at least $100 billion in assets. They would also be forced to use two methods to calculate the riskiness of their activities, then adhere to the higher of the two for capital purposes.
    “Today’s banking system has more large and complex banks than ever to support our dynamic economy,” acting OCC head Michael Hsu said in a statement. “Our capital requirements need to be calibrated to this reality: providing strong foundations for large banks to be resilient to a wide range of stresses today and into the future.”
    Regulators have invited commentary on their proposal through Nov. 30; banks and their interest groups are expected to push back against some of the new rules, saying they will boost prices for customers and force more activity into the so-called shadow banking sector.
    Trade groups including the American Bankers Association, the Consumer Bankers Association and the Financial Services Forum issued statements questioning the rationale for the stricter capital requirements.
    “There is no justification for significant increases in capital at the largest U.S. banks and no other jurisdiction is likely to adopt the approach proposed today, which will only increase the significant disparity that already exists between U.S. and foreign bank capital requirements,” Kevin Fromer, CEO of the Financial Services Forum, said in an email.
    “Regulators and other policymakers should carefully consider the harmful economic impact of this proposal,” he added. More