RISING DOLLAR COULD HIT U.S. BANKS WSJ’s

RISING DOLLAR COULD HIT U.S. BANKS

WSJ’s Victoria McGrane, James Sterngold and Ryan Tracy: “The strengthening U.S. dollar is rippling through the financial system in unexpected ways, revealing what bankers say is a hidden flaw in a Federal Reserve proposal to increase capital cushions at the nation’s largest banks. Big U.S. banks say that, under the rule proposed in December, the recent steep rise in the dollar’s value would force some U.S. firms to hold billions of dollars more in capital than foreign competitors, including weaker European banks, because of how the Fed plans to calculate a so-called surcharge levied on the eight most systemically important U.S. banks.

“The Fed rule is aimed at forcing big banks to add extra layers of financing to protect against losses. The banks believe it would wind up penalizing U.S. banks if the dollar remains strong against the euro, as many economists expect, because the high exchange rate makes their dollar-denominated assets and operations look larger relative to their European peers. Officials from banks including Citigroup Inc., Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley met privately with Fed officials in January to discuss the threat and other concerns about the rule, according to people who attended.”
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