By Justin Baer
Morgan Stanley's finance chief said Tuesday that recent remarks
by a Federal Reserve governor over the need to impose stiffer
capital rules on the largest U.S. banks were "consistent" with past
comments, while noting it still wasn't clear how the new
requirements would affect the Wall Street firm and its peers.
Federal Reserve Governor Daniel Tarullo said this week the
regulator intends to force the biggest banks to maintain an even
bigger cushion against potential losses than the so-called capital
surcharges put in place by international bank regulators. Mr.
Tarullo also warned that banks' dependence on overnight loans and
other forms of wholesale funding would help determine how high they
surcharge would be.
"He's been pointing in the direction that there would be some
sort of increment included for wholesale funding," Ruth Porat,
Morgan Stanley's chief financial officer, said Tuesday at the
Barclays Capital Global Financial Services Conference.
Among the biggest U.S. banks, Morgan Stanley trails only Goldman
Sachs Group Inc. in its reliance on the various forms of
short-term, wholesale funding.
"Our view is that not all wholesale funding is the same," Ms.
Porat said.
During her presentation, Ms. Porat argued Morgan Stanley had
been early to adapt to the new capital rules, and many of the New
York firm's key capital ratios were well above the minimums
expected by regulators. As Mr. Tarullo reiterated this week, those
requirements will move higher.
"I think it's a bit early to say" where the Fed will set the
surcharges, she said. "But we're starting with a strong capital
position."
When asked about how Wall Street's trading businesses were
faring in the third quarter, Ms. Porat offered a mixed bag. Morgan
Stanley and its peers have slogged through an unusually calm period
in the markets, limiting client activity and the opportunities for
banks to profit from price swings.
"There was a pickup in June that persisted through much of
July," Ms. Porat said. "August was very quiet, even for a typical
August. So, really, a lot of it hinges on what goes on through
September."
Write to Justin Baer at justin.baer@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires