Dallas, Texas 07/03/2013 (Financialstrend) – JPMorgan Chase & Co. (NYSE:JPM) shares currently trading at $52.51, down by 0.57%. The intra-day range of the stock is $52.12 – 53.53. The market capitalization of the company is $198.52 billion.
U.S. regulators are planning to tighten the capital requirements for the big players, a fact that would force banks to withhold their dividends payments for a period of five years. The new standards would require banks to increase the required capital to 6% of their combined assets irrespective of the risk. This is almost twice the existing level of 3% established by the Basel III Accord.
Tighter ratios will be implemented because of concerns of safety, with the purpose of preventing bank failures and would ensuring stability in the financial system. The measure would result in fewer cash holdings available for the bank and will reduce the dividend payment of the next five years. It is not clear whether the bank would be able to raise capital via selling shares after the tighter leverage ratios are implemented.
This standard would prevent banks from distributing their earnings as dividends, thus needing to retain more of their earnings. The withheld dividends would be used to build up the banks’ capital. Investors would be getting fewer dividends, thereby reducing their overall returns. Banks would have to resort to lending practices in order to fulfill their capital requirements, a fact that would reduce liquidity in consumer finance and housing markets.
This regulatory action would put a break on the growth in the economy, slow down the housing recovery and job creation, which have long been troubled after the financial tsunami of 2008.
This implementation of the standard would impact the following banks the most: JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC).
