- The plan revises Basel III safeguards to better reflect market, credit, and operational risks.
- Fed Chair Jerome Powell said adjustments to the G-SIB surcharge will align with global standards.
U.S. regulators have outlined plans to ease capital requirements for major banks, marking one of the most significant rewrites of financial rules since the 2008 crisis. The proposal could release billions of dollars in reserves, potentially fueling more lending, share buybacks, and dividends across Wall Street.
According to Bloomberg, the Federal Reserve, alongside the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, voted to unveil the plan on Thursday.
The proposals, open to a 90-day public consultation, would cut capital demands for the largest banks by an estimated 4.8% in common equity tier 1 capital, according to the Fed. Midsize and smaller banks could see even larger reductions of 5.2% and 7.8%, respectively.
Fed Vice Chair for Supervision Michelle Bowman said the plan would “strengthen our overall capital framework, which would remain robust under the new regime.”
The changes form part of broader efforts to adjust post-crisis safeguards introduced under Basel III while ensuring capital standards capture key market, credit, and operational risks.
See Related: Morgan Stanley Challenges Fed Over Capital Buffer In Rare Stress Test Dispute
Global Banks And Systemic Buffers
The package would also revise the surcharge for systemically important U.S. banks, indexing it to nominal GDP and assigning it in 10-basis-point increments instead of 50. Fed Chair Jerome Powell said the approach would align with international standards and allow the biggest banks to expand without steep capital surcharges.
The proposals drew praise from industry groups such as the Bank Policy Institute and the Financial Services Forum, which view the changes as restoring balance to post-crisis regulation. Democratic lawmakers and some academics, however, warned that they tilt the scales in favor of large financial institutions at the expense of stability.
It follows the rollback of a tougher 2023 capital plan. Critics, including Fed Governor Michael Barr, argued the reductions are “unnecessary and unwise.” Ratings agency Fitch said gradual loosening of leverage and stress-testing rules could erode banks’ capital buffers over time. Industry groups have backed the move, saying it could make U.S. banks more competitive against non-bank and global rivals.
