Federal Reserve Decision on Interest Rates
On June 18, the Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) unanimously decided to keep the federal funds rate unchanged, positioning it within a range of 4.25%-4.50%.
FDIC Public Comment on Regulatory Changes for US Bank Holding Companies
On June 27, the FDIC (Federal Deposit Insurance Corporation) issued a public call for comments on proposed changes to the enhanced supplementary leverage ratio (eSLR) for US bank holding companies deemed globally systemically important (GSIBs) and their subsidiary deposit institutions, as well as other related regulatory changes.
According to the Basel Committee, the minimum leverage ratio (Tier 1 capital divided by total leverage exposure) for banks in general should be 3%. In the US, this ratio is known as the supplementary leverage ratio (SLR). For GSIB holding companies, the SLR is 5%, and for their insured deposit institutions, it’s 6%. These levels are referred to as enhanced supplementary leverage ratio (eSLR).
The main proposal involves adjusting the buffer above the applicable eSLR for GSIB holding companies to equal 50% of the additional surcharge according to Method 1 of the Capital Surcharge Rate Framework based on the Fed’s Board of Governors’ risk assessment for bank holding companies.
Additionally, comments were sought regarding a potential modification in calculating the total exposure of GSIB holding companies of deposit institutions to exclude Treasury bonds registered as trading assets on their balance sheets.
Potential Impacts on US Banks’ Balance Sheets
The proposed eSLR change may have various effects on the balance sheets of large US banks. The primary observable change could be an increase in their total leverage exposure. Moreover, excluding Treasury bonds from the exposure calculation is likely to boost demand for these bonds by these institutions.
Economic Context and Bank Performance
On June 18, the FOMC of the Fed maintained the federal funds rate unchanged within a range of 4.25%-4.50%. The committee reaffirmed its view on economic activity expansion, citing recent indicators showing solid growth. They also noted that export net changes have distorted data, while acknowledging low unemployment and a robust labor market. Inflation was described as somewhat elevated, reflected in significant advances in the financial margins of major US banks.
- JPMorgan Chase & Co.: Reported a 2.0% a/a increase in financial margins during 2Q25, but experienced a 17.4% a/a net income decrease due to weak corporate division performance.
- Citigroup Inc.: Showed a 12.5% a/a financial margins growth and a 24.9% a/a net income increase.
- Bank of America Corporation: Displayed a 7.1% a/a financial margins increase and a 3.7% a/a net income growth.
- Wells Fargo & Company: Experienced a 1.8% a/a financial margins decrease and a 11.9% a/q net income growth.
In terms of quarterly net income, JPMorgan Chase & Co. reported a 17.4% a/a decrease, Citigroup Inc. showed a 24.9% a/a increase, Bank of America Corporation presented a 3.7% a/a advance, and Wells Fargo & Company had an 11.9% a/a growth.
Stock Performance of Major US Banks
As of July 15, 2025, the stock valuations of major US banks have performed notably well: JPM (+19.5%), C (28.9%), BAC (5.0%), WFC (12.3%).
The rise in these banks’ stock prices is attributed to a combination of factors, including predominantly positive recent reports, robust growth in financial margins due to expected benchmark rates above 4% for most of the year, and likely regulatory adjustments that would enable banks to expand their balance sheets.
