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Article from American Banker quantifying the hit that banks had to take recently due to the Jan 1 tax reform at maybe around 3% of total bank capital and perhaps more to the systemically important banks. “Banks are going to have to shrink the size of an asset on their balance sheets,” said Bill Reilly, an accountant at Grant Thornton who advises banks. “Their future tax deductions will be worth less.”...if Capital One records a 6 million charge, that represents 3.65% of its total equity capital. So if you put total system capital at around T, then 3% is B if you apply a 0.1 Leverage Ratio that implies a resultant system asset reduction of 0B.Then at the same time fiscal policy this month is adding 0B+ of reserve assets and you have a 0B total system asset level
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Article from American Banker quantifying the hit that banks had to take recently due to the Jan 1 tax reform at maybe around 3% of total bank capital and perhaps more to the systemically important banks. “Banks are going to have to shrink the size of an asset on their balance sheets,” said Bill Reilly, an accountant at Grant Thornton who advises banks. “Their future tax deductions will be worth less.”...if Capital One records a 6 million charge, that represents 3.65% of its total equity capital. So if you put total system capital at around T, then 3% is B if you apply a 0.1 Leverage Ratio that implies a resultant system asset reduction of 0B.Then at the same time fiscal policy this month is adding 0B+ of reserve assets and you have a 0B total system asset level
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Article from American Banker quantifying the hit that banks had to take recently due to the Jan 1 tax reform at maybe around 3% of total bank capital and perhaps more to the systemically important banks.
“Banks are going to have to shrink the size of an asset on their balance sheets,” said Bill Reilly, an accountant at Grant Thornton who advises banks. “Their future tax deductions will be worth less.”...if Capital One records a $976 million charge, that represents 3.65% of its total equity capital.
So if you put total system capital at around $1T, then 3% is $30B if you apply a 0.1 Leverage Ratio that implies a resultant system asset reduction of $300B.
Then at the same time fiscal policy this month is adding $200B+ of reserve assets and you have a $500B total system asset level discrepancy which has to resolve in a short time via risk assets being reduced; as the banks cannot control the level of the non-risk reserve assets.
So down we go...
Congress has now approved its massive tax reform bill. Here's what it will cost banks. https://t.co/TNDTGHCw9x pic.twitter.com/czkST1xgAt— American Banker (@AmerBanker) December 20, 2017