According to the Zhitong Finance APP, Deutsche Bank stated that U.S. bank stocks have rebounded since the end of September, which may force some of the largest banks in the U.S. to further reduce their activities in repurchase agreements or the foreign exchange derivatives market.
Bank stock prices are used to calculate part of the regulatory scores for Global Systemically Important Banks (GSIB), with assessments to be conducted at the end of the year to determine the additional fees that banks need to retain on their balance sheets. The higher the regulatory score, the more cash banks are required to hold. Banks tend to cut back on derivatives and repurchase market activities to lower potential scores before the end of the year.
Deutsche Bank strategists, including Steven Zeng, stated, &#34;For those banks whose GSIB metrics have increased during the year, the pressure to reduce year-end activities may be most severe, as they face the risk of higher additional fees in the coming years.&#34;
Based on the closing prices on November 21, the scores of five Global Systemically Important Banks with significant brokerage businesses could rise by 2.5 to 6.6 points.
Regulatory additional fees for major U.S. banks are expected to rise.
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Deutsche Bank estimates that these large banks need to reduce $95 billion in repurchase activities or $290 billion in foreign exchange activities to fully offset the impact of rising stock prices on their regulatory scores.
In recent weeks, year-end overnight repurchase rates (i.e., loans collateralized by U.S. Treasury securities) and mortgage-backed securities rates have surged. Part of the reason is the spike in repurchase volumes on September 30. Meanwhile, the recent surge in the U.S. stock market has increased demand for stock-collateralized repurchases, further exacerbating funding tensions. Wall Street is preparing for greater volatility on the last trading day of 2024.
Deutsche Bank indicated that more than half of the eight Global Systemically Important Banks may face pressure, with JPMorgan Chase (JPM.US) and Bank of America (BAC.US) already facing higher additional fees based on estimated scores for the third quarter. Goldman Sachs (GS.US), Morgan Stanley (MS.US), and Citigroup (C.US) are all close to the upper limit of additional fees corresponding to their scores.
JPMorgan Chase's estimated GSIB score for the third quarter has risen by 160 points since last year, and if the score remains unchanged by the end of this year, the bank will face a maximum additional fee of 5.5%. Deutsche Bank stated that to cope with a 50 basis point increase in additional fees, JPMorgan Chase would have to reduce at least $160 billion in repurchase activities.
Last month, JPMorgan CEO Jamie Dimon acknowledged that the bank &#34;will have $1 trillion in cash, but cannot fully deploy it in the Treasury market or the repurchase market,&#34; as it needs to keep this cash deposited with the Federal Reserve

Deutsche Bank warns that the rebound in U.S. bank stocks may force major U.S. banks to reduce share buybacks and activities in the foreign exchange derivatives market. Regulatory scores will be assessed at the end of the year; the higher the score, the more cash banks need to hold. It is expected that the scores of five globally systemically important banks will rise, leading to increased regulatory surcharges. JPMorgan Chase and Bank of America have already faced higher surcharges, and Deutsche Bank estimates that large banks need to reduce $95 billion in buybacks to offset the impact of rising stock prices

- Deutsche Bank reports that U.S. bank stocks have rebounded since late September, potentially forcing major banks to reduce repurchase agreements or forex derivatives activities.  
- The regulatory scores for globally systemically important banks (GSIB) will be assessed at year-end, impacting the capital they must hold, with higher scores requiring more cash reserves.  
- Major U.S. banks, including JPMorgan and Bank of America, face increased regulatory surcharges, with estimates suggesting they need to cut $95 billion in repurchase activities or $290 billion in forex activities to offset the impact of rising stock prices on their scores.

Stock price increase triggers a chain reaction! Deutsche Bank warns: Wall Street major banks may reduce buybacks