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https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl... >the Financial Services Mo

https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl... >the Financial Services Modernization Act of 1999...repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies, and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company FDIC insurance ends up being the main guarantee of safety, especially in the modern era of 0% reserve requirements.

NovemberWhiskey 4y ago
>especially in the modern era of 0% reserve requirements. Total red herring; reserve requirements went away but they were irrelevant because banks were holding massively in excess of the required reserves in any case.
JumpCrisscross 4y ago
> especially in the modern era of 0% reserve requirements They’ve been replaced with capital requirements, which make a lot more sense in modern finance than reserve requirements.
- iskander 4y ago
  What's the current state of those capital requirements in US banks? Is this the latest requirement? https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210805a.htm https://www.federalreserve.gov/newsevents/pressreleases/bcre... (4.5%) And how do banks actually measure up to this minimum?
  - tick_tock_tick 4y ago
    The Fed runs stress tests all the time and currently the banks are preforming perfectly during them.
    - Jon_Lowtek 4y ago
      which means the tests are not stressing. That is a good thing as they test for conditions that previously resulted in crashes. But it could also be a bad thing if the banks adapted to formally pass tests while straining their business with schemes that are overlooked
      - bobthepanda 4y ago
        We do know, at least from the last crisis, that so far the US stress tests have been effective at accurately gauging bank strength. (This is in contrast to the ECB stress tests during the Euro crisis, where repeatedly banks that had passed a stress test ended up needing bailouts or falling over.)
      - e63f67dd-065b 4y ago
        The conclusion during COVID was that the stress tests were too stringent and COVID was much better for the banks than worst case stress tests. Basically stress tests simulate large drops in asset values, but during COVID the trading desks made bucketloads of money when volatility was high. The financial sector is pretty resilient these days, the risky stuff mostly moved off bank balance sheets into private funds not subject to the same regulatory requirements.
  - NovemberWhiskey 4y ago
    The 4.5% is the baseline; subject to additional stress capital buffer (based on DFAST supervisory stress-test results) and systematically-important institution weighting. https://www.federalreserve.gov/publications/large-bank-capital-requirements-20210805.htm https://www.federalreserve.gov/publications/large-bank-capit... So JP Morgan is 11.2%; Citigroup is 10.5%; for example.

NovemberWhiskey 4y ago

>especially in the modern era of 0% reserve requirements. Total red herring; reserve requirements went away but they were irrelevant because banks were holding massively in excess of the required reserves in any case.

JumpCrisscross 4y ago

> especially in the modern era of 0% reserve requirements They’ve been replaced with capital requirements, which make a lot more sense in modern finance than reserve requirements.

iskander 4y ago
What's the current state of those capital requirements in US banks? Is this the latest requirement? https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210805a.htm https://www.federalreserve.gov/newsevents/pressreleases/bcre... (4.5%) And how do banks actually measure up to this minimum?
- tick_tock_tick 4y ago
  The Fed runs stress tests all the time and currently the banks are preforming perfectly during them.
  - Jon_Lowtek 4y ago
    which means the tests are not stressing. That is a good thing as they test for conditions that previously resulted in crashes. But it could also be a bad thing if the banks adapted to formally pass tests while straining their business with schemes that are overlooked
    - bobthepanda 4y ago
      We do know, at least from the last crisis, that so far the US stress tests have been effective at accurately gauging bank strength. (This is in contrast to the ECB stress tests during the Euro crisis, where repeatedly banks that had passed a stress test ended up needing bailouts or falling over.)
    - e63f67dd-065b 4y ago
      The conclusion during COVID was that the stress tests were too stringent and COVID was much better for the banks than worst case stress tests. Basically stress tests simulate large drops in asset values, but during COVID the trading desks made bucketloads of money when volatility was high. The financial sector is pretty resilient these days, the risky stuff mostly moved off bank balance sheets into private funds not subject to the same regulatory requirements.
- NovemberWhiskey 4y ago
  The 4.5% is the baseline; subject to additional stress capital buffer (based on DFAST supervisory stress-test results) and systematically-important institution weighting. https://www.federalreserve.gov/publications/large-bank-capital-requirements-20210805.htm https://www.federalreserve.gov/publications/large-bank-capit... So JP Morgan is 11.2%; Citigroup is 10.5%; for example.