Bloomberg - Evening Briefing - The banking endgame

Wall Street’s biggest banks are squawking about new safeguards for the financial system, including regulations that could erase almost all of the $118 billion in excess capital they’ve squirreled away over the past decade. The US Federal Reserve and the Federal Deposit Insurance Corp. will vote Thursday to propose the measures, part of an effort to put the US on track to adopt its final version of international banking standards known as the Basel III endgame. “As stress in non-bank financial markets is often transmitted to the banking system, both directly and indirectly, it is critical that banks have enough capital to remain resilient to those stresses,” Michael Barr, the Fed’s vice chairman for supervision, recently said.

The changes are part of the biggest revamp of capital rules for US banks since the aftermath of the 2008 financial crisis. Though the proposals likely won’t be implemented for years, they have already drawn criticism from top bank executives who claim the plans could make them less competitive against European rivals and buyout giants. Investors are of course worried about how the stricter requirements will affect lenders’ ability to repurchase shares. Six of the country’s biggest banks—JPMorgan, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs—currently sit atop an estimated $118 billion in so-called excess common equity tier 1 capital, according to Bloomberg Intelligence. But that cushion would be almost completely wiped out under rules that would require the equivalent of an additional two percentage points of capital. “This is great news for hedge funds, private equity, private credit, Apollo, Blackstone,” JPMorgan Chief Executive Officer Jamie Dimon told analysts on a conference call earlier this month. “They’re dancing in the streets.” For its part, the Fed says Wall Street doth protest too much. Banks affected by the changes could build up the required amount of capital in less than two years—even if they continued paying dividends—the central bank said. —David E. Rovella

As expected, the Fed raised interest rates by a quarter-percentage point and left the door open to additional increases as officials fine-tune efforts to further rein in inflation that’s been cooling for months. The hike, a unanimous decision, lifted the target range for the Fed’s benchmark federal funds rate to 5.25% to 5.5%, the highest level since 2001. It marked the 11th increase since March 2022, when the rate was near zero. 

NatWest Group’s board thought they could douse the political firestorm that has engulfed the bank. But they forgot to account for the most important shareholder: the UK government. Just hours after the bank expressed full confidence in chief executive Alison Rose, aides to Tory Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt began to spread the word that she had to go. Officials told reporters that the government had significant concerns about Rose staying on after she admitted leaking information about the closure of accounts held by Brexit-campaigner Nigel Farage.

Alison Rose Photographer: Chris J. Ratcliffe/Bloomberg

The Pentagon plans to issue a first-time contract to US or Canadian companies for gallium, a mineral used in military radar systems, after China curbed exports this month. China announced the restrictions on gallium and another mineral, germanium, in a move seen as part of the country’s tit-for-tat trade war on tech. The two metals are crucial to the semiconductor, telecommunications and renewable energy industries. The Pentagon, which has reserves of germanium but not gallium, plans to use its authority under the Defense Production Act for “prioritizing awards” by Dec. 31. Gallium is used in Navy radar on vessels for air and missile defense and by the Army and Marines in ground-based radar for detecting rockets, artillery, mortars, cruise missiles, and manned and unmanned aerial drones. 

After weeks of probing along its long front with Russian forces, Ukraine has reportedly begun the main thrust of its counteroffensive in the nation’s southeast, according to US officials.

Ukraine has reportedly started bringing to bear formations manning modern Western military hardware, like these Leopard 2 battle tanks, as part of its counteroffensive. Source: Bloomberg

Volkswagen plans to invest $700 million in Xpeng Inc. and jointly develop electric vehicles in China as the German automaker fights to halt a sales slide in its most important market. VW will eventually hold a 4.99% stake in the Chinese company via a capital increase and is getting an observer board seat. 

Amazon’s cloud unit has unveiled a range of new AI products, including a service intended to help health care providers summarize doctor visits and software that lets companies create their own chatbots. Looking to compete with Microsoft and Google in the burgeoning market for generative artificial intelligence, Amazon Web Services says its new HealthScribe summarizing tool has attracted interest. With the health care sector a significant battleground for generative AI, Amazon is jumping into the race. At risk, of course, may be untold thousands of jobs across the health care industry.

Former Thai prime minister Thaksin Shinawatra, who has lived in self-imposed exile for 15 years, is set to return to the Southeast Asian nation next month, a move likely to add to the political chaos that’s gripped the country since a May general election.

Thaksin Shinawatra Photographer: Isaac Lawrence/AFP

• Expat pay packages jump in Singapore while dropping in Hong Kong.
• Water-hungry data centers may make climate crisis consequences worse.
• A syphilis emergency is looming across the US as drugs run low.
• Trump-appointed judge throws wrench in Hunter Biden plea deal.
• Influencers built up a wellness startup—until they started getting sick.
• US airlines must install disability-accessible restrooms on jets.
• Close encounters with UFOs described to Congressional committee.

In a bid to ease overcrowding and meet elevated demand, Delta Airlines has opened its second lounge at New York’s John F. Kennedy airport—a 14,000-square-foot space with a 360-degree bar and a sky deck, all just a few minutes’ walk away from its flagship lounge in the same terminal. This new club is set up for different passenger needs, however. It’s smaller than the existing venue, with a capacity for 250 rather than the other lounge’s 550 maximum. It also skips certain amenities, such as showers, that are used primarily by travelers on overnight or long-haul routes.

Delta’s new club Photographer: Trista Luo/Bloomberg

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