Yellen said the proposal “would result in a significant aggregate increase in capital requirements” for the largest financial institutions, reports Nathan Bomey for USA Today.
Consequently, with the threat of further regulation on big banks and easing requirements on smaller companies, the small-cap banking industry and sector-related ETFs could outperform.
SEE MORE: Small-Cap Bank ETFs Could Win This Election Season
Investors interested in the small-cap banking sector have a number of options available. For instance, the First Trust NASDAQ ABA Community Bank Index Fund (NasdaqGM: QABA) tracks a group of community banks, including top components like Signature Bank 3.3%, East West Bancorp 2.8% and PacWest Bancorp 2.7%. The PowerShares S&P SmallCap Financials Portfolio (NYSEArca: PSCF) targets smaller financial companies from the broader S&P SmallCap 600 Index. The PowerShares KBW Regional Bank Portfolio (NYSEArca: KBWR) targets regional banks.
QABA market-cap weights include small-cap 47.3% and micro-cap 31.7%. PSCF holds small-cap 71.1% and micro-cap 27.4%. KBWR includes small-cap 67.1% and micro-cap 4.7%.
For more information on the financials sector, visit our financial category.