Fed Proposes Lowering Capital Requirements for Banks, Potentially Freeing Billions

Federal Reserve Chair Jerome Powell has signaled a significant shift in banking regulation, proposing to lower capital requirements for large financial institutions. The move WOULD amend the enhanced supplementary leverage ratio (eSLR), a rule implemented after the 2008 crisis to prevent excessive risk-taking.

Powell argued the current 5% capital floor for holding companies is outdated, citing the growing share of SAFE assets on bank balance sheets. The draft proposal would reduce the requirement to a range of 3.5%-4.5%, potentially freeing $13 billion at the holding company level and $210 billion for subsidiaries.

The Fed has opened a 60-day comment period on changes that would mark the most substantial relaxation of post-crisis banking rules. "It's prudent to reconsider our original approach," Powell told the Senate Banking Committee, framing the adjustment as a response to evolving financial conditions.