Federal Reserve to Ease Capital Requirements, Cutting Bank Hikes to 3–7%

Key TakeawaysThe U.S. Federal Reserve plans to relax capital requirements for large Wall Street banks, reducing potential increases to 3–7%.The move marks a policy shift under the Biden administration, following industry pushback against stricter Basel III “Endgame” rules.The new framework could lower compliance costs and boost lending capacity across major U.S. financial institutions.Fed Revises Plan to Reduce Capital Hike BurdenAccording to TechFlow, the Federal Reserve has submitted a revised capital framework proposal to other U.S. regulators aimed at easing capital requirements for major Wall Street banks.Under the updated plan, capital increases for most large banks would range from 3% to 7%, significantly below the 19% rise proposed in the 2023 draft and the 9% compromise discussed in 2024.Sources familiar with the matter noted that banks with larger trading portfolios might even face smaller increases or slight reductions, reflecting efforts to align regulation with market risk profiles.Industry Pushback Drives Policy AdjustmentThe Fed’s revisions follow intense lobbying by major U.S. banks, which argued that the original Basel III Endgame proposal would reduce lending and harm market liquidity.Analysts say the scaled-back approach represents a pragmatic balance between maintaining financial stability and supporting credit expansion amid a cooling U.S. economy.While the proposal still requires approval from other financial regulators, insiders suggest that the final rule could be implemented in 2025, easing the regulatory burden on large institutions like JPMorgan Chase, Goldman Sachs, and Citigroup.