Key officials are pushing regulators to finalize by August the Federal Reserve-led effort to revamp banks’ capital requirements, Bloomberg reported Wednesday, citing people familiar with the matter.
That means, most likely, making adjustments to the proposal that would require the biggest U.S. banks to hold roughly 19% more capital – rather than scrapping and rewriting it.
The measure has garnered “voluminous” feedback since it was issued nine months ago, Fed Chair Jerome Powell testified in March.
Powell, at the time, told House lawmakers he expected “broad and material changes” to the proposal. On the day of Powell’s testimony, House Financial Services Committee Chair Patrick McHenry of North Carolina and 28 other Republicans wrote the Fed urging for the proposal to be withdrawn over what the lawmakers called a lack of “rigorous quantitative analysis.”
Withdrawing and rewriting the proposal may carry political consequences, though, as that process – then accepting public comments and finalizing the rule – would push the timeline past the November presidential election. And if Republicans win the White House, it’s likely the Democrat-led capital-requirements effort would never take effect.
The Fed, in a statement to Bloomberg on Wednesday, said it “has made no decisions on timing, process or substance” of the proposal.
Powell reiterated that Wednesday in response to an observer’s question on the status of the capital requirements proposal. The question came at a press conference to discuss the Fed’s decision to keep interest rates steady.
“I’ll say again, though, if we conclude that re-proposal is appropriate, we won’t hesitate to insist on that,” Powell added, according to Bloomberg.
The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. – the other regulators involved in proposing the rule – declined to comment Wednesday to the wire service.
Officials are preparing, as soon as next week, to release a quantitative impact study, featuring 2023 year-end data the Fed has compiled from the nation’s largest banks, according to Bloomberg’s sources. The data, meant to show the proposal’s effect on certain aspects of banks’ business, may help the Fed estimate the costs and benefits of the rule’s various parts.
Some of the most impactful changes to the proposal may affect the way risk is assessed relative to a bank’s trading, wealth management and investment-banking activities, the wire service’s sources said, citing conversations among senior officials at the Fed, FDIC and OCC.
