Core Viewpoint - The U.S. bank regulator has approved new final rules to ease leverage requirements for banks, allowing them to set aside less capital against low-risk assets [1][4]. Group 1: Regulatory Changes - The Federal Deposit Insurance Corporation (FDIC) has approved the new rules for the "enhanced supplementary leverage ratio," with other regulators expected to follow suit [1]. - The new rules are estimated to reduce overall capital for large global banks by $13 billion, or less than 2%, while depository institution subsidiaries will see an average capital requirement reduction of 27%, equating to $213 billion [2]. Group 2: Implementation Timeline - Banks must comply with the new standard by April 1, but they can voluntarily adopt the rule as early as the beginning of 2026 [3]. Group 3: Context and Implications - The relaxed requirements are part of a broader initiative by the Trump administration to ease regulations established after the global financial crisis, aiming to promote economic growth [4]. - Critics argue that easing these safeguards increases risks for financial institutions and is not justified [4]. - The final rule requires banks to set aside capital based on their role in the global financial system, addressing concerns that the previous leverage requirements were too binding due to rising government debt [5]. Group 4: Additional Proposals - The FDIC has also approved a proposed rule to lower leverage requirements for smaller banks, reducing the community bank leverage ratio from 9% to 8% for banks with less than $10 billion in assets [6].

Core Viewpoint - The Federal Reserve is expected to increase its focus on community banks, with Vice Chair Michelle Bowman emphasizing their importance, although specific plans have yet to be announced [1][2]. Group 1: Community Banks' Current Challenges - Community banks are under significant pressure, competing with fintech companies for deposits and facing challenges from private credit that attracts borrowers away from local banks [3]. - The community bank industry highlighted their differences from failed lenders during the 2023 regional banking crisis and opposed contributing to the government's deposit insurance fund [3]. Group 2: Regulatory Framework and Proposals - Industry groups are advocating for the community bank leverage ratio, an alternative to risk-based capital measures, with only 1,662 out of over 4,000 community banks opting into it as of Q1 2025 [4]. - The head of the Conference of State Bank Supervisors called for a re-examination of compliance regulatory frameworks, suggesting that static, asset-based thresholds should be adjusted to align with economic growth [5]. Group 3: Engagement and Outreach - Bowman's approach to community bank reforms emphasizes outreach to understand significant threats to their business and the impact of regulations on their operations [6]. - While seeking feedback from community banks, proposals to ease regulations for large Wall Street banks are already in progress, including a rollback of the enhanced supplementary leverage ratio and an overhaul of stress tests [6]. Group 4: Capital Standards and Risks - Bowman is leading the development of a new risk-based capital proposal related to the Basel III endgame, having previously criticized a plan that would have increased capital requirements for large banks by 19% [7]. - Fed Governor Michael Barr warned that rolling back capital standards for large lenders could jeopardize protections for smaller banks, emphasizing that the 2008 financial crisis was driven by excessive risk-taking from the largest firms, not community banks [8].