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The Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced in 2010 by the Obama administration with the purpose of avoiding another destructive financial crisis like that of 2008, is considered to be one of the most comprehensive financial reform bills in recent history. Approximately 2,300 pages in length, the bill impacted “every firm delivering financial services and every part of the economic and financial fabric of the United States, with billions spent on compliance”[1]. Numerous positive and negative aspects of the bill have come to light since its implementation. Despite the seemingly good intentions of Dodd-Frank, the disadvantages of the bill heavily ou...

There are changes afoot in the way that banks are capitalized which will result in a tightening of credit conditions. These changes will make it harder for borrowers to gain access to credit, and will also impact banks’ profitability negatively. The regulatory bodies that establish banking rules are still wrestling with the banking crisis of 2008 and its implications, and want to ensure the solvency of “Systemically Important Banks” so that they are no longer considered “too big to fail”.
To understand why these proposed changes are important to the economy and to the stock market, we need to first get familiar with the following two organizations:

The Basel Com...