Capital requirements

The decision is seen as a setback for the banking industry, which had been pushing for an extension, and a win for Democrats, who have argued that a pandemic is no time for banks to be shedding capital.

The Federal Reserve will determine within days whether to extend the easing of the supplementary leverage ratio for big banks past March 31, Chairman Jerome Powell says. And it's a couple of weeks away from announcing whether there will be limits on second-quarter dividends and buybacks, he says.

The Senate Banking Committee is questioning whether Goldman Sachs Group paid dividends at the expense of lending to businesses and households during the pandemic as lawmakers take a broad look at the support big banks offered clients to get through the economic slump.

The House Financial Services chair joined other Democrats to warn the federal agencies against further easing of the supplementary leverage ratio, a key capital requirement for large banks.

The industry wants regulators to extend a temporary measure making it easier to satisfy the supplementary leverage ratio. But Democrats’ control of the White House and Congress has given a bigger platform to those who say banks have had enough relief.

Sens. Elizabeth Warren and Sherrod Brown urged regulators not to give in to industry requests to extend a temporary policy easing compliance with the supplementary leverage ratio.

Chair Jerome Powell told a congressional panel that the Federal Reserve is weighing whether to extend temporary relief from the “supplementary leverage ratio” — meant to help banks lend more during the pandemic — beyond March 31.

The Federal Reserve's “midcycle” assessment — conducted in light of the COVID-19 pandemic — said the path of the economic recovery is still uncertain even though the banks that were evaluated maintained adequate capital levels under hypothetical scenarios.

Executives from U.S. banks continue to play down near-term expectations, but they say customers are growing more confident ahead of the rollout of coronavirus vaccines, and that key commercial lending segments could drive an economic rebound.

Adolfo Marzol came to the agency after a stint at HUD and a 30-year career in the mortgage industry. He will depart on Dec. 18.

Fannie hasn't completed any credit risk transfers to private investors since the second quarter. Some experts worry the decision — likely spurred by the company’s concerns about a recent capital regulation — could put the mortgage giant on unsteady footing.

Vice Chairman of Supervision Randal Quarles said the agency wants to figure out why banks are holding on to capital that could be used more aggressively to respond to the pandemic.

The Federal Housing Administration said in its annual actuarial report that the capital reserve ratio on its mutual mortgage insurance fund increased to 6.10% in fiscal year 2020, up from 4.84% a year earlier.

The legislation would help institutions with less than $15 billion of assets avoid regulatory requirements resulting from participating in the small-business relief program.

Kashkari, who oversaw the 2008 bank bailouts as a then-Treasury official, has been outspoken in favor of higher capital requirements since he took over at the Minneapolis Fed in 2016.

Regulators in the spring temporarily eased a key benchmark of balance-sheet strength to allow institutions to help customers navigate the pandemic, but Federal Reserve Vice Chairman Randal Quarles said it would be “premature” right now to suspend it for good.

The Federal Reserve will continue its ban on share repurchases for banks with more than $100 billion of assets into the fourth quarter and will cap dividend payments using a formula based on recent income.

The Financial Stability Oversight Council said the mortgage giants may need a bigger capital cushion than their regulator has proposed, but stopped short of designating them as “systemically important financial institutions.”

Lenders should be subjected to tough reviews of their readiness for economic threats posed by severe weather, required to disclose risks lurking in their portfolios and perhaps forced to set aside extra capital, a government study recently recommended.

The Federal Housing Finance Agency's proposal could undermine the companies’ mission to support the housing market and penalize consumers in underserved communities, industry and consumer groups say.