Federal Reserve unveils new banking regulation in Wall Street victory

A senior Federal Reserve official on Tuesday unveiled changes to a proposed set of U.S. banking regulations that roughly halve the extra capital the largest institutions will be required to hold.

Introduced in July 2023, the regulatory overhaul known as Basel Endgame would have increased capital requirements for the world’s biggest banks by around 19%.

Instead, officials from the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. agreed to resubmit the massive proposal with a more modest 9 percent increase in big banks’ capital, according to prepared remarks by Fed Vice President for Supervision Michael Barr.

“This process has led us to conclude that broad and material changes to the proposals are warranted,” Barr said in remarks. “There are benefits and costs to increasing capital requirements. The changes we plan to make will bring these two important goals into better balance in light of the feedback we have received.”

The original proposal, a long-running response to the 2008 global financial crisis, sought to increase safety and tighten oversight of risky activities, including lending and trading. But by tightening the capital that banks must hold as a cushion against losses, the plan could also have made loans more expensive or harder to obtain, pushing more activity to non-bank providers, according to trade groups.

The previous version brought howls of protest from industry executives, including JPMorgan Chase CEO Jamie Dimon, who helped lead the industry’s push to reject the requirements. Now, it looks like those efforts have paid off.

This story is developing. Please check back for updates.