U.S. Fed Consider Easing Capital Requirements for Major Banks

The Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) are contemplating a revised strategy to reduce the planned capital requirement increases for the largest U.S. banks. Initially proposed at nearly 20%, the new requirements could be cut to slightly over 50% of the original amounts.

This potential policy shift comes after pressure from industry leaders, including JPMorgan Chase CEO Jamie Dimon, as reported by the Wall Street Journal.

The revised capital requirements aim to ensure banks like JPMorgan Chase and Goldman Sachs maintain additional capital to mitigate potential losses. However, the specifics of the new rules remain under negotiation, with the Federal Reserve, FDIC, and OCC still discussing substantial and technical modifications.

The regulators, collectively known as the Basel III regulators, proposed significant capital reforms last July for banks with assets over $100 billion. The proposed changes are intended to strengthen banks’ ability to handle losses and prevent failures or bailouts. 

Despite these intentions, major U.S. banks argue they are already adequately capitalised and that the proposed changes are unnecessary. The banking industry has criticised the Basel proposal, claiming it would force significant alterations or the discontinuation of various products and services. Goldman Sachs, for instance, has mobilised small business owners to voice their opposition in Washington as part of a broader lobbying effort to reassess the stringent capital rules.

The Federal Reserve, FDIC, and OCC have not commented on the ongoing discussions regarding the potential adjustments to the capital requirements.