The Federal Reserve is set to modestly reduce capital requirements for large U.S. banks under revised drafts of its sweeping regulatory framework, according to U.S. Federal Reserve Board Vice Chair Michelle Bowman. Speaking in Washington, Bowman said the proposed changes to Basel rules and the GSIB surcharge will lower capital requirements by a small amount through what she described as a sensible recalibration. The revisions aim to better align capital buffers with actual risk exposures while removing overlaps embedded in earlier proposals. Bowman said, “When capital requirements become excessive, they impair the banking system’s fundamental function of providing credit to the real economy.”
The overhaul reflects a broader shift following years of industry concern over stricter rules introduced after the 2007–09 financial crisis. Earlier proposals had suggested a sharp increase in capital requirements, prompting strong opposition from major lenders. Under the revised approach, capital levels are expected to return closer to 2019 benchmarks. Analysts estimate that large banks currently hold over $175 billion in excess capital, which could be deployed toward lending or shareholder returns once regulatory clarity improves. However, the proposals remain subject to industry feedback, and the final timeline for implementation is yet to be determined.
