Banking on Change: U.S. Regulators Poised to Shake Up Capital Rules by September 19
US Financial Regulators Set to Announce Sweeping Changes to Bank Capital Rules
The Federal Reserve and other regulators are set to announce significant changes to bank capital rules on September 19, according to Bloomberg News. The revisions, reportedly spanning up to 450 pages, will address operational risk provisions and are expected to have a profound impact on the financial landscape.
The changes will likely allow banks to reduce capital requirements for certain business areas, such as asset management services and specific credit card operations. Additionally, the revisions may ease market risk requirements for the largest US banks, potentially reducing the capital intensity of their mortgage and tax-deductible investments.
These adjustments are part of the ongoing evolution of the Basel III framework, introduced in response to the 2007-2009 global financial crisis. The crisis highlighted the need for more stringent regulations, as banks were found to be undercapitalized and in need of massive taxpayer bailouts.
In July 2023, the Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) solicited public comment on proposed changes to improve how large banks assess risk and determine required capital reserves. The banking industry has been vocal in its opposition to the original “Basel III Endgame” proposal, which aimed to tighten capital requirements for big banks.
Regulators have been working to revise their plans and mitigate the capital impact on large financial institutions. While the FDIC, Fed, and OCC have not commented publicly on the progress, the upcoming announcement is expected to provide clarity on the future of bank capital rules.
Key Takeaways:
- The Federal Reserve and other regulators will announce changes to bank capital rules on September 19.
- The revisions will address operational risk provisions and may reduce capital requirements for certain business areas.
- The changes are part of the ongoing evolution of the Basel III framework, introduced in response to the 2007-2009 global financial crisis.