Changes to Proposed Bank Capital Rules

(Reuters) – The U.S. Federal Reserve and other regulators are set to unveil sweeping changes to a raft of proposed bank capital rules as soon as September 19, as reported by Bloomberg News.

The revisions could span up to 450 pages and will include significant changes to operational risk provisions. This includes a reduction in the capital that banks must allocate against business lines such as wealth management services and specific credit-card operations.

The newly revised proposal is also expected to lower the market-risk requirements for the country’s largest lenders, easing stringent rules around mortgages and tax-equity exposures.

On Tuesday, Fed Vice Chair Michael Barr will preview the regulators’ revised proposal and outline the next steps at the Hutchins Center on Fiscal & Monetary Policy, as stated in a Brookings blog post.

Regulators began implementing the Basel III rules after the 2007-2009 global financial crisis, which necessitated taxpayer bailouts for several undercapitalized banks.

In July 2023, the Fed, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation proposed changes to bank capital rules for public comment. These new rules are anticipated to significantly revise how larger banks assess risk and the required capital holdings.

Banks opposed the original “Basel III Endgame” proposal, which aimed to increase capital requirements for larger institutions, and have been advocating for a re-proposal.

Regulators have spent months revising the plan to potentially reduce the capital burden on larger firms.

The Fed has declined to comment on this report. The FDIC and the Office of the Comptroller of the Currency have not yet responded to requests for comment from Reuters.