(Financial Times Europe, Martin Arnold and Claire Jones, March 20, 2026)
Major US regulators propose a 4.8% reduction in capital requirements for the largest banks, partially reversing the restrictions introduced after the 2008 crisis to encourage more lending and market share taken from private credit.
Medium-sized banks will see requirements drop by 5.2% and smaller banks by 7.8%, with an overall estimated impact of about $117 billion in capital freed once previous stress test adjustments are included.
The proposal represents a win for banking lobbies after a 19% increase in requirements was threatened in 2023 with the implementation of Basel III Endgame rules, now moderated to encourage lending and share buybacks.
Aggressive reduction of capital requirements for large banks.
Capital requirements for the largest US banks will be reduced by 4.8% according to regulators’ proposals, one of the most aggressive moves to ease restrictions imposed on Wall Street after the 2008 financial crisis.
Combined effect with previous reforms and estimated impact.
Including the impact of previous Fed bank stress test reforms, there would be a 4.8% reduction in required capital for the largest US banks with over $700 billion in assets, such as JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, and Citigroup.
Victory for lobbies and reversal compared to 2023.
The Fed’s proposals, subject to a 90-day consultation, represent a win for Wall Street lobbies. In 2023, the Fed had announced plans to implement Basel Endgame reforms that would cause a 19% increase in capital requirements for large US banks.
Positive opinion from Michelle Bowman, appointed by Trump.
These changes would strengthen our overall capital framework, which would remain robust under the new regime.
Internal Fed division and criticism from Michael Barr.
Michael Barr, a Fed board member, said he could not support the reforms as “unnecessary and reckless.”
(Excerpt from the newsletter by Giuseppe Liturri)
