Today’s News

The U.S. Federal Reserve, along with other regulatory bodies, is preparing to release significant revisions to proposed bank capital rules as early as September 19, according to a Bloomberg report on Friday that cites sources familiar with the matter. 

The updated proposal could extend to 450 pages and would introduce major changes, particularly in rules related to operational risk. These changes include lowering the capital requirements for banks against business lines such as wealth management services and specific credit card operations. 

The report also noted that the revised proposal would reduce the market-risk requirements for the largest U.S. banks. This would result in less stringent capital mandates for areas like mortgages and tax-equity exposures. 

Federal Reserve Vice Chair Michael Barr is scheduled to preview the revised proposal and outline the next steps in a presentation at the Hutchins Center on Fiscal & Monetary Policy next Tuesday, as mentioned in a blog post by Brookings. 

The Basel III rules were introduced after the 2007-2009 global financial crisis, which saw several undercapitalized banks being bailed out by taxpayers. In July 2023, the Federal Reserve, along with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), put forward proposed changes to bank capital regulations for public comment. These changes aim to overhaul how larger banks assess risk and determine their capital reserves. 

Banks have strongly opposed the initial “Basel III Endgame” proposal, which would have increased capital requirements for larger financial institutions. They have been advocating for a re-proposal of the rules. Regulators have been revising the plan for several months, potentially reducing its impact on capital for larger banks. 

When asked for a comment on the report, the Federal Reserve declined. The FDIC and the OCC did not immediately respond to Reuters’ requests for comments. 

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