US Federal Reserve Vice Chair for Supervision Michelle Bowman announced that banking agencies are preparing to introduce a revised version of the Basel III Endgame capital rules. The new proposal, expected by the end of 2025 or early 2026, aims to be more accommodating to the banking industry’s concerns. These rules implement global standards for banks to measure risk and allocate capital accordingly.
Bowman noted that the Fed is collaborating with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency on the re-proposal. A previous attempt under the Biden administration to significantly raise capital requirements for large banks was abandoned due to strong opposition from the banking sector, who deemed the increases unjustified. Now, regulators are looking to develop a rule that better addresses industry concerns, potentially resulting in a less severe impact on bank capital.
Speaking at a Georgetown University conference, Bowman suggested a need to ‘rightsize’ various capital requirements imposed on larger banks following the 2008 financial crisis, arguing that the post-crisis framework requires re-evaluation. She emphasised the importance of ensuring regulations are both effective and efficient. Bowman is spearheading an effort to re-examine bank requirements and overhaul government examiner practices, emphasizing that this isn’t about weakening rules, but rather optimising them.
Bowman clarified that the goal is not necessarily to reduce the number of requirements or lower capital levels. The focus is to ensure all regulations work cohesively, maintaining transparency and accountability for both banks and supervisors. This represents a significant shift from the previous proposal, signaling a potentially more balanced approach to bank regulation.
