Fed Moves to Loosen Capital Rules for Big Banks
Fed proposes capital rule changes that could free up to $6T in bank balance sheet capacity—sparking debate over systemic risk.
Summary
The Federal Reserve has proposed easing capital requirements for the largest U.S. banks, potentially unlocking billions in lending capacity. The move is designed to improve liquidity in the $29 trillion Treasury market—but not without controversy.
Key Takeaways
- Major Capital Shift: Proposed changes could lower minimum leverage ratios by up to 1.5%, freeing $185B–$6T in balance sheet capacity.
- Tailored Risk Approach: Requirements would adjust based on systemic risk profiles, not uniform percentages.
- Political Pushback: Fed Governor Michael Barr and Sen. Elizabeth Warren argue it increases systemic risk.
Why It Matters
The proposal marks a pivotal shift in post-2008 banking regulation. Supporters say it enhances market liquidity and risk calibration. Critics warn it could weaken the financial system’s resilience during crises—especially as banks re-enter the Treasury market more aggressively.
Source
Fed moves to lower capital buffer for US banking giants
Move could free up billions but raises alarms among critics over systemic risk
Candyd Mendoza
Fed's proposed capital rule rollback could unleash billions for Wall Street banks—while reigniting fears of systemic risk.
