Daily Market Commentary for July 2, 2013
Auto sales are bouncing back on the road to economic recovery, per reports during the month of June.
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Basel III
A global agreement to hike big bank capital buffers known as Basel III received unanimous vote of approval by the Federal Reserve on Tuesday. Basel III or the Third Basel Accord, is a global, voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity risk implemented in the wake of the 2008 financial crisis. A provision is included that would establish limits on a big bank's capital distributions and bonus payments if the institution does not have certain common equity buffers in place. The Fed withheld a provision that would have required large banking institutions to hold different levels of capital against a variety of riskier subprime and other mortgages. U.S. Federal Reserve Governor Daniel Tarullo said Tuesday at a public central bank meeting. "Despite its innovativeness in taking account of off-balance-sheet assets, the Basel III leverage ratio seems to have been set too low to be an effective counterpart to the combination of risk-weighted capital measures that have been agreed internationally."
FDIC Leverage Limit
A much-anticipated leverage limit proposal for big banks will be introduced on July 9 by the Federal Deposit Insurance Corp. Anticipated restrictions are expected to impact Bank of America (BAC), Citigroup Inc (C), Goldman Sachs (GS), J.P. Morgan Chase (JPM), Morgan Stanley (MS) and, Wells Fargo (WFC) which is supposedly in the best position to meet the more restrictive leverage limits. The restrictions are expected to be tighter than Basel III. Reportedly, the biggest banks will be required to hold as much as 6% of their total assets in capital as part of a leverage ratio.
Eurostat Unemployment Rate Higher
Eurostat, the European Union's official statistics agency, on Tuesday said the unemployment rate across the 17 euro countries was 12.2% - the highest since records began in 1995 - in May, not 12.1% reported in a release on Monday. The error in Eurostat's calculations was due to "an error in the loading of French data" that led to the unemployment rate for France being underestimated by half a percentage point and the unemployment rate for the euro zone as a whole - by a tenth of a percentage point.
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