Curious what just pushed stocks back to session lows?
It may have been yet another unexpected report by Reuters according to which top US Banking regulator, the Federal Deposit Insurance Corporation, said it had "no concerns" that volatility in the equities and futures markets posed a threat to the banking system, telling Reuters the country's lenders have plenty of capital to weather further market swings.
Of course, this is a carbon copy of what the OCC did yesterday, when the spokesman for the Office of the Currency Comtroller said that "the federal banking system ... is strong with capital and liquidity near historical highs and improved earnings and risk management. From this strength, the federal banking system is well positioned to manage more adverse market conditions” and in the process unleashed yet another bout of selling.
Today, for some unexplained reason, it was the FDIC that decided to chime in, when Chairman Jelena McWilliams told Reuters that banking regulators had begun a review of the so-called CAMELS rating system used to assess the health of the nation's banks.
"Frankly, recent market movements have not given us any reason to be concerned," she said in an interview. "Banks are well capitalized. Actually, they are superbly well capitalized at this point in time.
"Nothing that happened in December gave us concern" McWilliams said in hopes of calming the market, and achieving the opposite outcome.
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McWilliams, who became FDIC chair in June and was appointed by President Donald Trump to review post-crisis rules, has said some new rules can be tailored to help small banks. On Thursday, she told Reuters regulators have begun a review of the system used to rate the financial health of banks.
She said the Federal Financial Institutions Examination Council, an interagency group comprising the country's bank regulators, was reviewing whether agencies are applying the CAMELS rating consistently.
McWilliams said she was worried that any differences could encourage banks to seek out less rigorous regulators: "You don't want to have any sort of forum shopping," she said. "You want to ensure the banks know that they're going to get the same shot" regardless of the regulator.
And with this odd warning coming out of the blue, stocks promptly faded back near session lows as traders are once again left to wonder just why in the span of under 10 days we have gotten repeat assurances from banks, the OCC and the FDIC that "banks are fine" and "well positioned" for a crisis, when nobody was wondering the opposite in the first place.
In any case, a few more "assurances" such as this one - perhaps the Plunge Protection Team should address the nation next - and the investing world will observe first hand just how prepared for a crisis US banks truly are.