The Federal Reserve’s top banking regulator has privately told executives at large U.S. lenders that she does not expect another round of broad, aggressive opposition to the central bank’s revised capital rules, according to three people familiar with the conversations.
Michelle Bowman, the Fed’s vice chair for supervision, has held discussions in recent weeks with bank leaders in which she conveyed that regulators have worked to address industry concerns and that they expect comments on the new drafts to be focused and specific, the three people said. The revised proposals, made public last month, include relaxed drafts of the "Basel III" and "GSIB surcharge" rules that the Fed has estimated would reduce capital levels at big U.S. banks by about 4.8% compared with its earlier 2023 plan.
That earlier 2023 proposal had envisioned roughly 20% increases in capital for the largest firms and prompted an unprecedented industry campaign against it. Banks responded with a broad lobbying push that included outreach to congressional lawmakers, billboard advertisements around Washington, prime-time commercials and threats of litigation. The earlier plan had been led internally by Michael Barr, Bowman’s Democratic predecessor in the supervision role.
Despite the Fed’s reassurances, not all firms are satisfied with how the revised package treats them. In an unexpected development this week, JPMorgan Chase said its measured regulatory capital level would rise by roughly 4% under the updated framework, even as the industry as a whole stands to see an estimated aggregate reduction of around 4.8%. JPMorgan’s chief executive, Jamie Dimon, reiterated criticism of the proposals in the bank’s annual shareholder letter, describing elements of the plan as still "very flawed" and calling some aspects "un-American."
Other large lenders indicated in recent earnings calls that they expect to seek adjustments and plan to submit feedback during the Fed’s formal 90-day comment window. Two of the sources said Fed officials have asked that those comments, which are due around mid-June, be limited in scope and be specific in nature. A Fed spokesperson declined to comment on those discussions.
What Fed officials have communicated to banks
- Fed officials, including Bowman, have signaled they have made substantial changes to reflect industry complaints and do not expect a reprise of last year’s aggressive tactics.
- Regulators have asked for concise and targeted feedback during the formal comment period, rather than wide-ranging campaigns.
- Officials are aiming to finalize the rules this year and move past a protracted public battle that drew criticism for creating political friction within the Fed’s leadership.
Bowman reiterated a desire to conclude the rulemaking at the Institute of International Finance conference in Washington this week. She said she would accept feedback but emphasized the pace of the process, noting her hope to finalize the proposals in the current year. "I’m sure not all of it is going to be positive, but my hope is we’ve struck the right balance, I think it’s a very middle-of- the-road, reasonable proposal," she said.
The Fed’s messaging is consequential for banks that feel they lost out under the revisions or that have been offered less favorable adjustments than peers. Those firms face a narrower chance to secure changes that would materially alter how the final rules affect their capital positions.
Political and governance considerations
Officials have additional incentives to move the process along quickly. Some executives and analysts cited the upcoming November midterm elections as a timeline factor; a change in the political complexion of Congress could invite renewed scrutiny of the proposals, particularly from those who view the revisions as favorable to banks.
The internal dynamics of the Fed’s board also shape the calculus. Bowman, an appointee of President Donald Trump, and Treasury Secretary Scott Bessent have argued that economic growth will support financial stability and that the modified rules will better align with actual risks. That position has critics who warn that easing capital requirements may introduce new vulnerabilities for the financial system.
Two Democratic governors on the Fed board, Lisa Cook and Vice Chair Philip Jefferson, voted in favor of Bowman’s proposals. Michael Barr, who left the supervision post last year but remains on the board, registered a dissent. With Republicans in the majority on the board, Bowman technically does not require additional votes to proceed, but the central bank has traditionally sought broad consensus. Bowman said at the conference, "We worked very hard to have as much consensus as possible."
Implications for markets and lenders
While the Fed estimates the revisions will reduce capital requirements for the largest banks by around 4.8% on average, the effects are not uniform. JPMorgan has reported an increase in its capital level of about 4% under the current draft, illustrating how the outcome varies by institution. Several other major banks have said they will provide feedback during the comment period and are likely to pursue additional tweaks where they perceive inequities.
The coming weeks will reveal whether banks submit targeted, technical comments as Fed officials have requested, or whether some firms revive broader tactics to press for more extensive relief. The Fed’s posture suggests it expects the former, and regulators have signaled an intent to move relatively quickly toward a final rule set.
Summary - Fed officials, led by Vice Chair for Supervision Michelle Bowman, have told major banks they do not expect another aggressive industry campaign to challenge revised capital rule drafts. The Fed’s updated Basel III and GSIB surcharge proposals are estimated to lower capital for large U.S. banks by about 4.8%, but impacts are uneven, with JPMorgan projecting a roughly 4% increase to its capital. Officials have asked that public comments due around mid-June be limited and specific, and Bowman has expressed a desire to finalize the rules this year.
Key points
- The Fed has issued softer drafts of the Basel III and GSIB surcharge rules projected to lower big banks’ capital by about 4.8% on average.
- Michelle Bowman communicated to bank executives that regulators expect focused, specific feedback in the 90-day comment period rather than another broad, aggressive campaign.
- Effects will vary across institutions - JPMorgan said its capital level would rise by around 4% under the plan.
Risks and uncertainties
- Some banks remain dissatisfied and may still seek changes, which could prolong the rulemaking process and affect capital planning for lenders - impacting the banking sector.
- Critics warn that looser capital rules could introduce hazards for financial stability, creating risk for broader financial markets.
- Political shifts following the November midterm elections could lead to heightened scrutiny of the proposals, potentially complicating or delaying finalization - affecting regulatory certainty for banks.