Page 17 - Banking Industry analysis (H)

Second, GSIBs can’t increase their dividends or stock
buybacks without the Federal Reserve’s approval in the

annual comprehensive capital analysis and review, or
CCAR.

Third, GSIBs can’t use as much leverage as their smaller

counterparts, which weighs heavily on a GSIB’s

profitability.

The net result is that GSIBs, ceteris paribus, are no longer

able to compete on a level playing field against the likes

of U.S. Bancorp and M&T Bank, among others.

Nevertheless, U.S. banks recovered from the crisis much

faster than European banks. Within days of Lehman’s

demise in 2008 the U.S. banks, as well as AIG, the insurer,

and other companies were forced to take equity

injections from the federal government, whether they

needed and wanted them or not. (7)

This was TARP, the U.S. Troubled Asset Relief Programme,

that earmarked around $700bn for companies in
difficulty.

However, this figure was later reduced to $475bn, of

which only $245bn was injected into the banks. These

banks eventually repaid $275bn, having replaced public

money with private funding and in 2014 the government

sold its remaining shares in a TARP bank. (7)

It has been argued that the slowness of the European

Banks to recover was a function of European authorities