WASHINGTON, March 19 - U.S. bank regulators under the Trump administration are preparing to formally unveil a revised and softened set of draft capital rules on Thursday that could represent a notable win for large financial institutions. The changes being circulated are expected to lower, modestly, the amount of capital major banks must hold against potential losses, according to recent statements from Federal Reserve regulatory chief Michelle Bowman.
The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency plan to approve a draft of the Basel-related proposal on Thursday morning and open a period for public comment. That step will kick off another likely intense round of industry lobbying as banks and other stakeholders seek to shape final terms and gain greater clarity about how the rules will affect individual institutions.
The package revises what has been known as the Basel Endgame - the final element of international capital standards developed after the financial crisis - which governs how banks calculate and set aside capital for credit, market and operational risks. The proposals constitute a marked shift from the tougher original draft released in 2023, which would have raised capital requirements significantly for some lenders.
Michelle Bowman has said the revised proposals would better align requirements with measured risks. But critics caution the rollback could weaken system-wide safeguards at a moment when geopolitical tensions and private-credit exposures are rising. The revised draft represents a sharp reversal from the earlier plan that many in the industry saw as imposing double-digit percentage increases in required capital.
Regulatory debate over the Basel Endgame has stretched for years. Bowman's Democratic predecessor, Michael Barr, had pursued a version of the rule that would have increased capital for certain banks by as much as 20%. That approach prompted an unprecedented campaign by lenders seeking to soften the proposal, drawing support from numerous lawmakers and creating division among the agencies responsible for the rule. The project subsequently moved into the Trump administration, which has largely sided with industry calls for relief.
In parallel with the Basel draft, the Fed also intends to propose modifications on Thursday to the global systemically important bank - or GSIB - surcharge applied to the eight riskiest U.S. global banks. Those adjustments would update some economic inputs and revise the method for calculating short-term funding risk. Taken together, the Basel-related changes and the GSIB tweaks are expected to leave large-bank capital either slightly lower or roughly unchanged on net.
Analysts at Morgan Stanley have estimated that major banks currently hold roughly $175 billion in excess capital. With clearer rules, that buffer could be released over time for activities such as additional lending, share repurchases and dividend payments.
Market watchers and industry analysts have welcomed the regulators' willingness to revisit the more punitive elements of the original plan, but cautioned that final outcomes will depend on technical details that remain to be seen. "The initial proposals were pretty punitive and to their credit the regulators have taken their time to try to get it right. Who knows if it will be perfect but certainly they are listening," said KBW analyst Chris McGratty.
As the agencies solicit feedback, banks, lawmakers and other stakeholders will press their views in the public comment process. The response will shape how much capital large banks ultimately must retain and how much they may redeploy into lending and shareholder returns once the rulemaking is complete.
Summary of developments
- Regulators will approve a softened Basel-related capital draft and begin a public comment period on Thursday morning.
- The Fed will separately propose adjustments to the GSIB surcharge, changing certain economic inputs and short-term funding risk calculations.
- Combined changes are expected to modestly reduce or leave large-bank capital roughly unchanged; Morgan Stanley estimates roughly $175 billion in excess capital sits at big banks today.