Major regulatory rollback proposed for big banks, potentially freeing up $210 billion

From Yahoo Finance: 2025-06-25 13:40:00

US regulators proposed a rollback of bank capital rules, benefiting major lenders like JPMorgan Chase, Bank of America, Goldman Sachs, and Morgan Stanley. The change would lower the eSLR ratio for big banks by 1.4 percentage points, totaling approximately $13 billion, and 10 percentage points for bank subsidiaries. The goal is to increase lending and boost Treasury market buyers.

The Federal Reserve governors will vote on the proposal, which aims to strike a balance between financial stability and Treasury market resilience. While the proposal has support, some Fed governors like Barr and Kugler oppose it, citing increased systemic risk and reduced capital for the largest banks.

The proposed capital ratio changes could free up $210 billion for systemically important institutions, but critics argue it may lead to increased risk and prioritization of shareholder returns over Treasury intermediation. Treasury Secretary Scott Bessent signaled this move aligns with the Trump administration’s deregulatory agenda.

The proposal could benefit big banks, particularly trading banks, according to TD analyst Jaret Seiberg. Further changes may be on the horizon, with Fed’s vice chair for supervision, Michelle Bowman, hinting at broader capital rollback discussions beyond the eSLR requirement. A conference on the capital framework for US banks is set for July 22.

Bowman emphasized the need for long-overdue capital requirement reform, including adjustments to other requirements like surcharges on global systemically important banks. The Fed’s decision to no longer consider reputation risk in bank exams signals a shift in regulatory priorities under new leadership, focusing on safety and soundness.



Read more at Yahoo Finance: Big banks are closer to getting one of biggest regulatory rollbacks since 2008