New Bank Rules Will Be Felt By Financial ETFs (XLF, IYF, VFH)

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May 24, 2010 8:56pm NYSE:IYF NYSE:VFH

“Both the U.S. House and Senate recently passed sweeping financial overhauls which include more stringent rules on lending, increased debt-to-capital ratios on large financial institutions and


 refinements in the regulation of derivatives markets. The two bills are similar in nature, are expected to be merged into one by the end of the summer, and will likely have an influence on the financial sector,” Kevin Grewal Reports From The Street.

“On the lending forefront, both bills will make it extremely difficult for mortgage brokers to make money on high interest loans and will require loan-seekers to demonstrate and prove their ability to make monthly payments via paycheck stubs or other financial security. Additionally, both bills call for a new consumer watchdog to oversee all lending, in which the House sets up a stand-alone Consumer Financial Protection Agency with rule-writing powers and the Senate set up an independent bureau within the Federal Reserve,” Grewal Reports.

Grewal goes on to say, “With regards to debt-to-capital ratios, bills passed by both the House and Senate require banks to hold more money to cover their debts. The House calls for a specific leverage cap on financial institutions of 15:1 debt-to-net capital ratios, whereas the Senate calls for banks with more than $250 billion in assets to meet the same capital standards as those that apply to smaller banks. At the end of the day, both bills aim to set tougher rules on the financial sector, but leave some weaknesses in the system unaddressed. Some hybrid version of these two bills will be signed into law in the coming months and will influence the following financial ETFs: The Financial Select Sector SPDR ETF (NYSE:XLF), iShares Dow Jones US Financial Sector ETF (NYSE:IYF), and the Vanguard Financials ETF (NYSE:VFH),”

See more to the article: HERE

Here are some more details we put together on the ETFs mentioned in the article below:

Financial Select Sector SPDR ETF (NYSE:XLF)

The Financial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Financial Select Sector Index (ticker: IXM). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

Fund Top Holdings
As of05/18/2010
Name Weight Shares Held
Bank Of America Corporation 9.80% 38,585,916
Wells Fargo & Co New 9.71% 19,926,572
Jpmorgan Chase & Co 9.50% 15,281,422
Berkshire Hathaway Inc Del 7.65% 6,365,103
Citigroup Inc 4.49% 75,587,890
Goldman Sachs Group Inc 4.43% 2,024,634
American Express Co 2.92% 4,602,841
Us Bancorp Del 2.86% 7,360,669
Morgan Stanley 2.29% 5,377,004
Bank Of New York Mellon Cor 2.16% 4,646,976

Chart forFinancial Select Sector SPDR (XLF)

iShares Dow Jones US Financial ETF (NYSE:IYF)

The iShares Dow Jones U.S. Financial Sector Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the financial and economic sectors of the U.S. equity market, as represented by the Dow Jones U.S. Financials Index.

Top Daily Holdings*
as of 5/18/2010
BANK OF AMERICA CORP 8.00%
JPMORGAN CHASE&CO 7.83%
WELLS FARGO&COMPANY 7.56%
CITIGROUP INC 3.88%
GOLDMAN SACHS GROUP INC 2.99%
BERKSHIRE HATHAWAY INC-CL B 2.95%
US BANCORP 2.35%
AMERICAN EXPRESS CO 2.12%
BANK OF NEW YORK MELLON CORP 1.76%
MORGAN STANLEY 1.67%
Total 41.11%
*Holdings are subject to change.

Chart foriShares Dow Jones US Financial Sector (IYF)

Vanguard Financials ETF (NYSE:VFH)

The investment seeks to track the performance of a benchmark index that measures the investment return of financial stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI U.S. Investable Market Financials index. This index consists of stocks of large, medium-size, and small U.S. companies within the financials sector. This sector is made up of companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, financial investment, and real estate. It is non diversified.

TOP 10 HOLDINGS ( 42.36% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Bank of America Corporation Com (BAC) 8.42
JP Morgan Chase & Co. Common St (JPM) 8.37
Wells Fargo & Company Common St (WFC) 7.17
Citigroup, Inc. Common Stock (C) 4.07
Goldman Sachs Group, Inc. (The) (GS) 3.95
U.S. Bancorp Common Stock (USB) 2.35
  (BRK.B) 2.21
American Express Company Common (AXP) 2.09
Berkshire Hathaway N/A 1.97
Bank of New York Mellon Corpora (BK) 1.76

 Chart forVanguard Financials ETF (VFH)


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