JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC) and Goldman Sachs Group Inc. (NYSE: GS) all benefited from news on Monday as new global rules for capital requirements were clarified.
The new set of rules, agreed to on Sunday in Basel, Switzerland, was agreed on by top central bankers and various regulators. The rules, known as Basel III, will leave less money for loans, but may not be enforced until in full until 2019. Analysts said that there were no negative surprises from the announcement and that it reduced uncertainty for the stocks.
As a result of the news, JPMorgan Chase & Co. (NYSE: JPM) traded up 3.8% during the day. Wells Fargo & Co. (NYSE: WFC), Bank of America Corp (NYSE: BAC) an Goldman Sachs Group Inc. (NYSE: GS) were all up more than 2.5%. Morgan Stanley (NYSE: MS) and Citigroup, Inc (NYSE: C) also rose, but less than 2.5%.
The new rules would boost banks’ required Tier 1 capital ratio from 4.0% to 4.5% in 2013 and to 6% in 2019. Banks would also have to keep an emergency reserve of 2.5% known as a “conservation buffer,” for a total of 8.5% of its balance sheet in cash.
Horowitz said in his research note that the banks that are the best capitalized, JPMorgan Chase & Co. (NYSE: JPM) and Goldman Sachs Group Inc. (NYSE: GS), will likely increase their dividends and buy back shares, returning money to investors, now that the rules have been clarified.
