"Amnesty" on Wall Street? New US regulations may only require the largest banks to increase capital by 9%

The US banking industry's new capital regulations proposal has once again been reported to significantly reduce capital requirements.

On Monday, September 9th, Eastern Time, Bloomberg reported, citing sources, that after regulatory agencies agreed to comprehensively revise the proposed rules, the new proposal will require the largest banks in the United States to increase their capital by 9%, a significant decrease from the original plan.

Last July, the Federal Reserve and other US regulatory authorities released a new banking regulation proposal requiring banks with assets exceeding $100 billion to increase their capital by approximately 16%. Among them, the capital requirements for the eight largest US banks such as JP Morgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley may face an increase of about 19%. Banks with assets between $100 billion and $250 billion may see a capital increase of around 5%.

A few months ago, it was reported that the above banking regulations were expected to be significantly relaxed. In June of this year, media reports indicated that the Federal Reserve presented a modified proposal to other regulatory agencies, which significantly lowered the capital requirements for large trading banks, potentially revoking some key proposal contents, especially those that could have a significant impact on large banks, especially those with large-scale trading operations. Based on the modified content of the proposal, the increase in bank capital may be reduced from the initial 16% to a minimum of 5%.

The aforementioned Bloomberg report on Monday suggested that the significant reduction in capital requirements is more likely to appease the banks. After the release of the new rule proposal in July last year, the banking industry launched an unprecedented lobbying campaign. The revised new proposal may also help Federal Reserve Chairman Powell achieve the goal of obtaining broad internal support within the Federal Reserve.

Last month, Wall Street News mentioned that media reports stated that on July 19th this year, Powell and the CEOs of the same group of major banks attended a closed-door meeting. During the meeting, Powell encouraged the leaders of these major banks to cooperate with the Federal Reserve to avoid getting involved in lengthy legal disputes due to the proposal of new capital regulations. The meeting was hosted by the Financial Services Forum, an industry organization of major US banks, and attendees included the CEOs of the four major US banks - JP Morgan, Morgan Stanley, Citigroup, and Bank of America.

At the meeting, the CEOs of major banks asked Powell whether the Federal Reserve would act independently of other regulatory agencies when announcing key revisions and soliciting public opinions. Some attendees revealed that Powell's impression left on them was that the Federal Reserve may act independently of other regulatory authorities in announcing modifications to the new rule proposal. Powell mentioned the regulations of the EU's implementation of the Basel Agreement, pointing out that the EU's version would increase banks' capital overall by 10% Media reports indicate that comments made by Powell at the above meeting on the proposed new capital rules to banks were described as high-level comments, focusing on how he intends to achieve the final regulations, finalize the regulations in part by seeking new public opinions and releasing relevant proposal impact studies. Powell told major banks that they should now submit questions to the Federal Reserve to avoid future litigation.

At the July Federal Reserve monetary policy report related congressional hearing, Powell told lawmakers that the United States has made "considerable progress" in amending regulations based on the Basel Accord, and regulators are "very close" to making decisions on the final revised version of the new regulatory proposal.

Powell believes that regulators should seek more opinions on the new US version of the Basel Accord regulations. He expects that after issuing the revised proposal, the Federal Reserve will seek a period of public comment, which is expected to be around 60 days