US Bank regulators unveil proposed new rules easing large bank capital requirements; Fed to propose revised GSIB surcharge that lowers biggest bank capital by 3.8%; Totality of capital changes under consideration would reduce largest bank capital by 4.8%

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US Bank regulators unveil proposed new rules easing large bank capital requirements; Fed to propose revised GSIB surcharge that lowers biggest bank capital by 3.8%; Totality of capital changes under consideration would reduce largest bank capital by 4.8%

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  • Regulators to propose new standardized approach for smaller banks, banks between USD 250-100bln in assets would see capital fall by 5.2%
  • Revised BASEL III proposal would increase large bank capital by 1.4%.
  • Banks below USD 100bln would see capital reduction of 7.8% under proposals.
  • New proposals would require larger regional banks to account for unrealized losses, would boost capital requirements by 3.1%.

FOMC Comentary

  • Fed Governor Barr dissents on proposals, says totality of changes would reduce GSIB capital by 6% or USD 60bln.
  • Fed Chair Powell supports proposals, says it is prudent to re-examine rules and proposals preserve core capital requirements for large banks
  • Vice Chair for Supervision Bowman says proposals modernise bank capital requirements, addresses ‘overly calibrated’ rules.

Context

The unveiling of proposed new rules to ease capital requirements for large banks signals a significant regulatory shift, particularly as it could result in a 4.8% reduction in capital for the largest banks. This move may influence investor perceptions of risk within the banking sector, potentially impacting equity valuations and broader market sentiment. Additionally, the mixed responses from Fed officials highlight ongoing debates about the balance between capital adequacy and financial stability.

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