Risk-based capital

Early industry reaction to the Federal Reserve's Basel III proposals points to potential capital relief for banks, though stakeholders say the complexity of the changes makes their overall impact unclear.

Federal regulators issued proposals Thursday to implement the final elements of the Basel III accords, adjust the global systemically important bank surcharge and implement standardized approaches for risk-weighted assets. The changes would reduce capital requirements for banks of all sizes affected by the rules.

Federal Reserve Vice Chair for Supervision Michelle Bowman outlined upcoming changes to the bank regulatory capital framework in a speech Thursday, focusing on streamlining bank capital requirements through Basel III and global systemically important bank surcharge rules.

Federal Reserve Vice Chair for Supervision Michelle Bowman said in comments Wednesday that the central bank plans to publish its Basel III endgame capital proposal for public comment before the end of March.

Federal Reserve Vice Chair for Supervision Michelle Bowman said in a speech Monday morning that the central bank will introduce two capital proposals that she said are aimed at boosting banks' role in the mortgage market.

Treasury Secretary Scott Bessent is slated to testify in the House Financial Services Committee Wednesday morning as part of the committee's regular oversight of the Financial Stability Oversight Council.

A Government Accountability Office report warns the Office of the Comptroller of the Currency to clarify which records from the Basel Committee on Banking Supervision should be treated as federal records and thus retained according to the Federal Records Act.

Capital One, PNC, Truist and, U.S. Bancorp are urging regulators to cut duplicative calculations and align U.S. rules with global standards, a longstanding preference for banks but one that will likely find a warm reception from a deregulation-focused Trump administration.

Europe's top finance ministers are questioning the U.S.'s commitment to the global capital standards. The mistrust could have consequences for international regulatory efforts.

Consumer Financial Protection Bureau Director Rohit Chopra's decision to withhold support of a reworked Basel III endgame capital proposal is logical as a way to gain leverage in this and future rule negotiations but may ultimately not amount to much.

Consumer Financial Protection Bureau Director Rohit Chopra joins the Federal Deposit Insurance Corp.'s two Republican board members in opposing a revamped Basel III endgame proposal, leaving the future of the nascent plan uncertain.

The Federal Reserve chair said he supports the revised proposal outlined by Vice Chair for Supervision Michael Barr and said the new proposal would get a vote by the full Board of Governors early next year.

A plan reportedly being floated by the Federal Reserve would reduce the top-line capital raise for the biggest banks by as little as 5% — down from 16% in the original proposal from last July.

In congressional testimony, the Federal Reserve chair said the Board of Governors is processing the comments on its capital reform proposal. Putting forth an entirely new proposal is "very plausible."

Large and regional banks are taking different approaches to buybacks in light of the proposed new capital rules. Some plan to buy back stock at moderate levels this year, while others say they will to remain on the sidelines until there is more clarity about the reforms.

Banking regulators' push for higher capital for the largest banks may very well pass in some form, but before it does, there needs to be an articulated plan for tackling the migration of banking activities out of the banking system.

Federal Reserve Gov. Michelle Bowman, a vocal opponent to the proposed risk capital rules for large banks, said she still sees a path forward for capital reform.

In official comments on bank regulators' Basel III endgame capital proposal, concerns are being raised by a wide array of stakeholders — including civil rights advocates and consumer advocacy groups — suggesting major amendments or re-proposal may be necessary for the rule to cross the finish line.

Former Trump Labor Secretary Eugene Scalia has been enlisted by the Bank Policy Institute to utilize his procedural expertise in advising on potential legal challenges to the Basel endgame capital proposal, as the banking industry intensifies efforts to challenge increased capital requirements for large banks.

Federal Reserve Vice Chair for Supervision Michael Barr said feedback received will be incorporated into the final version of the capital reform rule.