US bank regulators to unveil long-awaited capital rule rewrite

Core Viewpoint - The U.S. bank regulators are set to unveil softened capital rules that may benefit Wall Street banks by allowing them to increase lending, share buybacks, and dividends [1]. Group 1: Regulatory Changes - The new capital proposals are expected to modestly reduce the capital reserves that large banks must maintain for potential losses, marking a significant shift from previous drafts that proposed double-digit increases [2]. - The Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency are preparing to approve the Basel draft and will begin soliciting feedback, indicating a new phase of industry lobbying [3]. - The changes are a result of a prolonged campaign by Wall Street banks to ease regulations imposed after the 2008 financial crisis, which they argue hinder economic growth [4]. Group 2: Industry Impact - Analysts estimate that large banks currently hold approximately $175 billion in excess capital, and the clarity on the new rules could enable them to utilize this capital for lending and share buybacks [8]. - The Fed plans to propose adjustments to the "GSIB surcharge" for the eight riskiest global U.S. banks, which may lead to a slight decrease or stabilization in big bank capital [7]. Group 3: Historical Context - The previous proposals aimed to increase capital requirements for some banks by as much as 20%, but significant lobbying efforts from lenders led to a weakening of these rules [6]. - The regulators have been working for years to implement the "Basel Endgame," which focuses on how banks assess and allocate funds to various risks [5].