The U.S. Federal Reserve’s Vice Chair for Supervision, Michelle Bowman, has communicated to big bank executives that she does not anticipate the industry staging another aggressive pushback in a bid for further capital relief. This clear message follows the Fed’s recent unveiling of relaxed new drafts for its “Basel III” and “GSIB surcharge” rules, a development largely seen as a victory for the banking sector after its fierce efforts to significantly water down the central bank’s original 2023 proposal.
The revised regulations are now estimated to reduce capital levels at major U.S. banks by approximately 4.8%, a substantial change from the 20% hikes initially envisioned in the previous plan. However, the benefits are not uniformly distributed across the industry, leading to some discontent. For instance, JPMorgan, which is the biggest U.S. bank, stated on Tuesday that its capital level is actually projected to increase by around 4% under the new framework, underscoring the varied impact on different institutions.
Despite the overall softening of the rules, some big bank executives indicated during earnings calls this week that they would likely seek specific changes and plan to provide detailed feedback to the Fed during its formal 90-day comment period. Fed officials, including Bowman, have clearly communicated in recent meetings that they have worked diligently to address previous bank complaints. They have also conveyed that industry comments, which are due by around mid-June, should be limited and specific, rather than a reprise of the aggressive tactics deployed when fighting the 2023 plan. A spokesperson for the Fed declined to comment on these communications.
