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Bloomberg: Largest U.S. Banks Resist Federal Reserve’s Credit Limits

April 30, 2012, 07:30 AM
Filed Under: Regulatory News

Bloomberg reported the largest U.S. banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., told the Federal Reserve that a limit on their credit exposure is unnecessary and “fundamentally flawed.”
According to the report, the Federal Reserve’s proposed rules on single-counterparty credit limits would have a negative impact on banks, their customers and the U.S. economy, according to a letter sent to the central bank today by five banking trade groups, including the Clearing House Association.

The Bloomberg report cites the text of the letter obtained by Bloomberg News as stating, “The Federal Reserve has provided no basis to determine that imposing the dramatically lower and arbitrary 10% credit limit on certain major covered companies would even help mitigate risks to the U.S. financial stability, much less be necessary.”

Additional signers of the letter are the Financial Services Roundtable, the Securities Industry and Financial Markets Association, the Financial Services Forum and American Bankers Association. The Clearing House also represents Citigroup Inc. and Bank of America Corp. in addition to JPMorgan.
The 10% credit risk limit is more restrictive than that contained in the Dodd-Frank financial overhaul law, which allowed for a 25% limit according to Bloomberg.

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