Powell Announces Looming Changes to Bank Capital Requirements

Federal Reserve Chairman Jerome Powell announced that U.S. regulators are close to finalizing a revised plan requiring major banks to hold more capital.

This plan could significantly benefit Wall Street banks by reducing the burden on them. Powell told senators about a proposal requiring major U.S. lenders to hold 19% more capital.

This capital would buffer against losses. Powell said regulators would seek public comments but did not specify adjustments.

Large banks have opposed the original plan, arguing it could limit their lending capabilities. Powell indicated that regulators might open a 60-day comment period for the revisions.

The capital review ties to Basel III, an international agreement from the 2008 financial crisis to prevent bank failures.

The U.S. proposal also addresses issues from the Silicon Valley Bank and Signature Bank collapses in March 2023.

The Fed shared a document with U.S. regulators, suggesting changes to ease the burden on Wall Street lenders.

Powell Announces Looming Changes to Bank Capital Requirements

These revisions would roll back parts of the initial proposal, particularly those affecting banks with significant trading operations.

Reuters reported that the Fed is considering reducing the extra capital that the largest U.S. banks must hold, known as the GSIB surcharge. The Fed declined to comment on this report.

This policy shift matters because it represents ongoing efforts to balance financial stability with economic growth.

By revising capital requirements, regulators aim to protect the banking system while ensuring that lending and investment activities are not stifled.

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