The Federal Reserve shared with other U.S. regulators the framework of a revised plan that would significantly relax a Biden-era capital proposal for the nation’s biggest banks, according to a media report on Wednesday.
Some officials figure the terms of the Fed’s latest plan would increase capital requirements for most big banks by 3%-7%, Bloomberg News reported, citing people familiar with the matter.
That compares with the Fed’s original Basel III endgame proposal, which would have boosted the amount of capital banks need to set aside to weather a potential downturn by ~19%. A compromise version floated last year would have resulted in a ~9% capital increase.
The 2023 proposal met with vehement objections by U.S. banks, which contended that such severe requirements would force them to reduce lending activity, especially to low-income borrowers.
Banks with the biggest trading portfolios could see a lower increase, or even a decrease, as a result of the new requirement, some of the people told Bloomberg.
As Fed Vice Chair for Supervision, Michelle Bowman is leading the process. She was selected by President Donald Trump to head the Fed’s supervision role after Michael Barr, a Biden nominee, stepped down from the role in February 2025.
The three main regulators responsible for U.S. banks are required to approve any capital plan. The other two bodies are the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. (“FDIC”).
The Federal Reserve intends to unveil the pared-back plan, which is not yet final, as soon as Q1 2026, Bloomberg has reported.
Stocks of the largest U.S. banks rose modestly in Wednesday premarket trading. Citigroup (NYSE:C) stock increased 0.4%, JPMorgan Chase (NYSE:JPM) edged up 0.1%, Bank of America (NYSE:BAC) +0.1%, Wells Fargo (NYSE:WFC) +0.3%, Goldman Sachs (NYSE:GS) +0.5%, and Morgan Stanley (NYSE:MS) +0.8%.
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