U.S. banks will probably hold off on striking deals until the end of next year at the earliest as they await clarity on new rules on capital requirements, according to deal advisers and industry experts, Reuters reported. Potential buyers and sellers are also being deterred by the long wait for deal approvals by regulators. “Everyone's frozen in place until they know what the rules of the road are,” said Timothy Adams, CEO of the Institute of International Finance. Adams expects deals to be stalled through 2026 as the U.S. implements standards that were agreed by the Basel Committee on Banking Supervision after the 2008 financial crisis but then took years to be finalized. Global regulators agreed to give banks a transition period to meet the new requirements and set the beginning of 2025 as the target for full implementation. At the same time, banks are also waiting to fund a potential increase in capital requirements signaled by the Federal Reserve's vice chair for supervision, Michael Barr, in the aftermath of a U.S. regional banking crisis this year. The uncertainty over capital rules has created a "chilling effect" that could put a lid on mergers, while rising interest rates and a looming economic downturn could also damp activity, Adams said. Still, banks in distress may be forced to sell. Deals involving banks either in receivership or under stress rose to $23.2 billion in the first quarter to the highest since 2019, according to data from Dealogic. That compares to $3.9 billion in bank deals for non-stressed institutions, the lowest seen over the first half of a year since 2010. (Subscription required.)
