“There are good arguments that central bank cash and certain government-guaranteed debt should not be included and that would have a major impact on us,” BNY Mellon Chief Financial Officer Todd Gibbons said today during a conference call with analysts and investors. The New York-based firm has more than $200 billion of cash and government-backed securities on its $360 billion balance sheet, he said.
BNY Mellon was one of eight large U.S. banks told by regulators on July 9 they needed to meet higher capital requirements by 2018. The holding companies would need to retain capital equal to at least 5 percent of assets, and their banking units would have to hold a minimum of 6 percent, under the proposal.
“It’s kind of perverse to think that we have to hold capital against cash that we hold at central banks,” BNY Mellon Chief Executive Officer Gerald Hassell said today during the call.
A July 10 research note from Goldman Sachs Group Inc. estimated that BNY Mellon would fall short under both measures. The bank could easily come into compliance with the rules by selling some of the securities on its balance sheet, Richard Bove, an analyst with Rafferty Capital Markets LLC, said in a telephone interview before BNY Mellon’s earnings were announced today.
BNY Mellon will discuss what’s included in the ratios with regulators, and potentially engage clients in the discussions, Gibbons said today in a telephone interview.
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