Friday’s Agreement On Financial Reform Bill A Positive For Financial Industry: Oppenheimer
Oppenheimer says, “Friday, lawmakers reached an agreement on the Financial Reform bill. The legislation still needs to be approved by both the House and Senate before the President can sign it into law. We view this step as a positive for the financial industry because it removes some of the overhang of uncertainty. Moreover, based on our take, the bill provides some concessions to banks over activities such as derivatives, private equity, and hedge funds.”
“The reconciled Lincoln amendment was not as restrictive as initially proposed by Senator Lincoln. Banks would be allowed to retain operations related to interest-rate swaps, FX swaps, and gold and silver swaps. These activities constitute roughly over 90+% of total notional of derivatives, on average, for the major banks we cover,” the analysts mention.
Oppenheimer adds, “Another positive was that the reconciled "Volcker Rule" would allow banks to continue their activities in private equity and hedge funds. The rule limits the amount banks may invest in these funds to 3% of the fund's capital or 3% of Tier 1 Capital.”
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