Trump administration is said to move to ease capital rules for big banks

The Trump administration is preparing to roll back a key financial safeguard imposed after the 2008 crisis, in a move expected to benefit major Wall Street banks, Politico reported Saturday, citing people familiar with the matter.

Regulators appointed under President Donald Trump are finalizing a proposal that would reduce the amount of capital large banks must hold to protect against financial shocks.

The forthcoming proposal, developed collaboratively by the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), is anticipated to be unveiled in the coming months.

At the center of the debate is the supplementary leverage ratio, a requirement that compels banks to hold a minimum level of capital based on their total assets, regardless of risk. Critics of the rule, including some Republican officials and industry advocates, argue it discourages banks from holding safe assets like U.S. Treasuries, thereby limiting liquidity in government debt markets.

Treasury Secretary Scott Bessent has made reducing capital requirements a top policy goal. He has pointed to the recent turnover in regulatory leadership following the 2024 election as a key driver for advancing this shift, suggesting that financial institutions now have a clearer path to influence regulatory outcomes. Bessent also emphasized that easing the SLR could help lower interest rates by making it easier for banks to participate in the Treasury market.

The policy direction represents a sharp departure from the previous administration’s efforts. Under President Biden, regulators had pursued stricter capital standards, which were met with strong opposition from the banking sector. Those proposals were ultimately shelved, as banks argued that the heightened requirements were unnecessary and counterproductive.

This latest push would mark the first significant regulatory initiative under the current administration targeting post-crisis banking rules. Officials are reportedly weighing two main options: revising the SLR formula to reduce capital burdens, or reviving aspects of a temporary 2020 policy that excluded Treasuries and central bank reserves from the calculation. That temporary relief, introduced during the pandemic to support financial markets, expired in 2021.

Some regulators, such as acting FDIC Chair Travis Hill, have signaled that a proposal is imminent. He suggested that adjustments should better reflect the realities of large banks’ balance sheets and avoid unnecessarily restricting their operations.

Meanwhile, critics of the plan argue it undermines financial stability. Advocacy groups like Better Markets have warned that easing capital rules at a time of mounting government debt and market volatility could create new systemic risks. One policy expert suggested that using Treasury market instability as a justification for rolling back capital safeguards is disingenuous, given that those same assets are being deemed low-risk by the very institutions seeking relief.

While the administration hopes the changes will reinvigorate demand for government debt and improve market functioning, analysts are skeptical that the effects will be substantial. A senior strategist at a major investment firm said the adjustment may have some impact, but likely won’t be enough to counteract broader concerns about rising U.S. deficits and waning interest from foreign buyers.

Though the specific details of the upcoming proposal remain under discussion, and agencies like the Fed, OCC, and FDIC have declined to comment publicly, the move underscores a broader philosophical shift: a return to looser regulation, with the belief that such flexibility will spur economic growth, even if it means accepting higher financial risk.