US Regulators Plan Reduced Bank Capital Rules

Federal Reserve Vice Chair for Supervision Michelle Bowman announced on March 12 that U.S. banking regulators are preparing a revised draft of capital rules that would slightly reduce requirements for large banks, marking a shift from earlier proposals aimed at strengthening financial safeguards. The changes, set for release as early as next week by the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, target the Basel III endgame framework, an international standard designed to ensure banks hold sufficient reserves against losses.

Bowman, speaking at the Cato Institute in Washington, described the revisions as a recalibration to eliminate duplicative standards and align requirements more closely with actual risks. The proposals would lead to a small net decrease in capital needs for the largest institutions when combined with adjustments to other rules, including a modest reduction in surcharges for global systemically important banks, or GSIBs. For these 29 major banks, overall requirements could remain flat or dip slightly, potentially freeing up more than $175 billion in excess capital across the industry. Smaller and...