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The Federal Reserve has produced a three-page document offering a lighter version of capital rules for large U.S. banks that has been shown to U.S. regulators, according to a media report.
While the document does not provide an updated estimate of how much additional capital larges banks would have to hold to weather financial shocks, calculations suggest that the changes would increase required capital by as little as 5%, Bloomberg News reported on Monday, citing people familiar with the matter. That’s compared with the overall 16% boost it originally proposed.
The changes would ease key parts of the proposal, including one that could have a big impact on big banks with sizable trading businesses, they said.
The timing of finalizing the capital proposal is still uncertain. It’s still difficult to tell if a revised package could be adopted before the U.S. presidential election in November. Fed Vice Chair of Supervision Michael Barr has met with the heads of the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. to discuss lowering the capital increase, Bloomberg said, citing people familiar.
In recent appearances, Fed officials have declined to say how long it will take to revise the original plan linked to bring the U.S. in line with Basel III banking rules. “We’re going to take a very thoughtful approach to the (proposed) rule,” Barr said in April.
Last July, U.S. regulators introduced their initial proposal, which applies chiefly to financial institutions with assets that exceed $100B. The draft elicited harsh criticism from banks, saying the increase in required capital would hurt their ability to lend, especially to rural and lower-income customers. The biggest banks told Congress in December that they could meet the proposed rules, but it would affect their ability to lend.
The KBW Bank Index (BKX) rose 1.9% in late Monday trading, with the biggest banks all in the green — JPMorgan Chase (NYSE:JPM) gained 1.3%, Bank of America (NYSE:BAC) +1.5%, Citigroup (NYSE:C) +2.7%, Goldman Sachs (NYSE:GS) +2.7%, Morgan Stanley (NYSE:MS) +1.3%, and Wells Fargo (NYSE:WFC) +1.8%.