Fed Bank Capital Rules: Major Changes
- The Federal Reserve is substantially scaling back its proposed bank capital overhaul, a move that follows strong opposition from Wall Street. Federal Reserve Vice Chair for Supervision Michael...
- Barr indicated that the Basel III endgame rule will be revised to be less stringent.
- The changes to bank capital requirements reflect a balancing act, according to Barr.
The Federal Reserve has eased its bank capital rules after facing industry pushback; the revised rules will increase capital requirements for the largest banks by 9%, a significant reduction from the initial proposal. This shift, announced by Federal Reserve vice Chair Michael Barr, reflects a recalibration of the Basel III endgame rule, making it less stringent, while also implementing separate capital rules for large, high-risk lenders. Banks with over $250 billion in assets will largely avoid these new Basel regulations. This adjustment balances the benefits and costs associated with capital requirements. News Directory 3 is keeping tabs on these developments. Explore the final form of these regulations and their impact on lending practices. Discover what’s next.
Federal Reserve Eases Bank Capital requirements After Industry Pushback
Updated May 29, 2025
The Federal Reserve is substantially scaling back its proposed bank capital overhaul, a move that follows strong opposition from Wall Street. Federal Reserve Vice Chair for Supervision Michael Barr announced Tuesday that the revised plan would increase capital requirements for global systemically important banks (GSIBs) by 9%. This is a considerable reduction from the initial proposal last July, which suggested a 19% increase.
Barr indicated that the Basel III endgame rule will be revised to be less stringent. A separate capital rule will be implemented for large, high-risk lenders. Banks with assets exceeding $250 billion will be mostly exempt from the Basel rule. Barr did not provide a specific date for when the federal Reserve will propose the new outline. The original proposal primarily targeted financial institutions with assets exceeding $100 billion.
The changes to bank capital requirements reflect a balancing act, according to Barr.
“There are benefits and costs to increasing capital requirements. The changes we intend to make will bring thes two important objectives into better balance, in light of the feedback we have received,” Barr said at the Brookings Institution in Washington, D.C.
an earlier proposal in June suggested a smaller increase in required capital, around 5%, compared to the original 16% increase.
What’s next
The Federal Reserve is expected to release further details on the revised bank capital requirements in the coming weeks.The industry will be watching closely to see the final form of the new regulations and their potential impact on lending and economic growth.