US to Propose Revisions to Basel Rules This Month, According to Bloomberg Reports by Reuters

The U.S. Federal Reserve and other regulatory bodies are expected to announce significant changes to proposed bank capital rules as early as September 19, according to a report by Bloomberg News citing knowledgeable sources.

The revisions may span up to 450 pages and will include important modifications to operational risk provisions. Notably, there could be a decrease in the amount of capital banks need to set aside for certain business lines, such as wealth management and specific credit-card functions.

Additionally, the new proposal is likely to lessen the market-risk requirements for the country’s largest banks, easing regulations related to mortgages and tax-equity exposures.

On the upcoming Tuesday, Fed Vice Chair Michael Barr will preview the revised proposal and outline forthcoming actions at the Hutchins Center on Fiscal & Monetary Policy.

Regulatory authorities initiated the rollout of Basel III rules following the 2007-2009 global financial crisis, which compelled taxpayers to bail out several undercapitalized financial institutions.

In July 2023, the Federal Reserve, alongside the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, invited comments on proposed changes to bank capital rules. These changes are anticipated to revamp how larger banks evaluate risk and determine necessary capital reserves.

Banks have strongly opposed the earlier “Basel III Endgame” proposal, which aimed to increase capital requirements for larger institutions, and have been advocating for a new proposal.

Regulators have been refining the plan over the past months to significantly lessen the capital burden on larger firms. The Federal Reserve has not commented on the report, and both the FDIC and the Office of the Comptroller of the Currency have not yet responded to requests for comment.