US Regulators Considering Slashing Proposed Capital Hike for Big Banks: Report

By Jace Dela Cruz

May 20, 2024 12:40 AM EDT

The Federal Reserve and two other US regulators are reportedly considering a new plan to reduce a nearly 20% mandated increase in capital for the country's largest banks. 

According to the Wall Street Journal, it comes after the intensive lobbying of industry leaders such as JPMorgan Chase CEO Jamie Dimon.

A man stands prior to a press conference by Federal Reserve Chair Janet Yellen in Washington, DC, March 16, 2016.
(Photo : SAUL LOEB/AFP via Getty Images)

Hike in Capital Requirements

On average, the required increase for lenders would reportedly be pushed to be reduced by about half as initially suggested.

The revision aims to ensure banks like JPMorgan Chase and Goldman Sachs maintain adequate buffers to absorb potential losses. The proposed rules recalibrate how banks calculate how much money they must set aside to cover risks.

Top officials from the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, the three agencies involved in the pending capital rules, are still discussing the details. 

WSJ reported that there is no guarantee that an agreement will be reached, or it could be later this year before any plan is ready.

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The Basel Proposal

In July last year, the three regulatory bodies proposed an overhaul for banks with assets exceeding $100 billion. This Basel proposal seeks to enhance banks' resilience against potential losses, thereby reducing the risk of failure or the need for bailouts. 

However, banks argue that they are sufficiently capitalized and that the proposed changes are unnecessary. Major US banks have actively opposed the Basel proposal, claiming it would necessitate significant alterations or the discontinuation of certain products and services. 

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