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S&P increases banks’ Dodd-Frank cost estimates to $34 billion

Bank of America and JPMorgn Chase are two of eight American lenders that may see $34 billion in annual pretax profit cuts as a result of new trading limits.

Matthew Albrecht, a credit analyst at Standard & Poor’s, said that the bank earnings may fall by $22 billion to $34 billion as a result of Dodd-Frank regulations. Albrecht previously predicted a decrease of $19.5 billion to $26 billion, according to SFGate.

“Most of the higher estimate reflects our view that regulators could take a more strict interpretation of the Volcker Rule than we previously expected,” Albrecht said, SFGate reports.

The Volcker Rule, a provision of the 2010 Dodd-Frank Act, seeks to prohibit banks from engaging in proprietary tradin— or risky investments with client funds. Opponents of the controversial rule maintain that it would damage U.S. competitiveness and cause market disruptions.

In addition to JPMorgan Chase and Bank of America, institutions that will bear the brunt of the Dodd-Frank-related expenses include Citigroup, Goldman Sachs, Morgan Stanley, PNC Financial Services, U.S. Bancorp and Wells Fargo, according to 24/7 Wall St. Wire.

The regulatory costs should not affect banks’ credit ratings, but S&P did warn that, in some isolated cases, the increased costs could very well have an impact on ratings.

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