Federal Reserve Softens Proposal to Raise Capital Requirements for US Banks

The Federal Reserve has revised its proposed capital requirement increase for large U.S. banks, reducing the originally proposed hike significantly following opposition from the banking industry and political figures from both sides of the aisle. Michael Barr, vice chair for supervision at the Federal Reserve, announced the softened terms in a speech on Sept. 10 at the Brookings Institution in Washington, in what he described as a “re-proposal” that slashes by more than half the Fed’s original proposal for a capital requirement increase for the nation’s biggest lenders whose collapse could trigger financial chaos. The revisions come after months of lobbying, debate, and public comment on what’s known as the “Basel Endgame” proposal, a set of rules intended to strengthen the banking sector’s resilience against future financial crises by increasing the amount of capital they hold as a rainy day buffer. For the past year or so, the Fed and its fellow watchdogs have been pushing the new rules, which are a U.S. interpretation of global regulations agreed in Basel, Switzerland, to overhaul banks after the 2008 global financial crisis and make them more resilient....