Federal Reserve supervisory leadership has privately advised executives at major financial institutions to refrain from launching another intense campaign against recently proposed capital requirements, according to three individuals familiar with these discussions.
Michelle Bowman, the Federal Reserve’s Vice Chair for Supervision, has conveyed to banking leadership that regulators do not anticipate the financial sector mounting another forceful opposition effort similar to their previous resistance, sources revealed.
Last month, the central bank introduced revised versions of banking regulations known as “Basel III” and “GSIB surcharge” requirements. Federal Reserve analysis suggests these updated rules would decrease capital requirements at large American financial institutions by approximately 4.8%. This outcome represents a significant win for the banking sector, which had mounted fierce resistance to the Fed’s initial 2023 proposal that would have imposed 20% increases.
However, the advantages from these regulatory changes will not be equally shared across all institutions, and some remain dissatisfied with the outcome, sources indicated. JPMorgan Chase, America’s largest bank, announced Tuesday that its capital requirements would actually rise by roughly 4% under the proposed framework.
During this week’s earnings announcements, other major bank executives indicated the industry would likely pursue some modifications and planned to submit feedback during the official 90-day public comment period.
In recent weeks, Bowman and fellow Fed officials have communicated during meetings with bank executives that regulators have made substantial efforts to address industry concerns and do not expect financial institutions to repeat the aggressive resistance strategies employed against the 2023 proposal, the three sources confirmed.
Regulators have indicated that industry feedback, which must be submitted by approximately mid-June, should be focused and limited in scope, two sources said.
A Federal Reserve spokesperson declined to provide comment on the matter.
