The Federal Reserve's new framework "unleashes" Wall Street by significantly relaxing capital requirements for large banks

According to informed sources, the Federal Reserve has presented a framework for a revised plan to other U.S. regulatory agencies, which will significantly relax the capital proposal requirements for large Wall Street banks during the Biden administration. Sources indicate that some officials estimate that the terms of this plan will keep the overall capital increase for most large banks between 3% and 7%. Although specific forecast data is not included in the framework, this estimate is far lower than the 19% increase proposed in 2023 and below the 9% increase suggested in last year's compromise version. Some insiders pointed out that for banks with large trading portfolios, the capital increase may be even smaller or could potentially decrease due to the new requirements. Although the plan is still in its preliminary stages, it is likely to be welcomed by Wall Street banks, which had previously strongly opposed the initial version of the "Basel III Endgame" proposal. Critics argue that a significant increase in capital could raise lending costs and put U.S. banks at a disadvantage against international competitors; supporters, however, claim that it is crucial for financial stability. Earlier reports indicated that the Federal Reserve plans to announce this yet-to-be-finalized new plan as early as the first quarter of 2026. Michelle Bowman, who was appointed by former President Donald Trump as the Federal Reserve's Vice Chair for Supervision, is currently leading the development of this new measure. Informed sources stated that the regulatory agencies are also considering a proposal in the revised framework: if mid-sized banks agree to comply with other capital restrictions, they may receive an exemption option from the new capital rules. These sources noted that U.S. officials have not yet reached a final agreement on the plan, but the regulatory agencies have generally reached a consensus on the overall direction of the measures. According to insiders, Bowman has consulted with the heads of the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), both of which must approve the plan. The OCC spokesperson did not respond to requests for comment, while representatives from the FDIC and the Federal Reserve declined to comment. As regulators move to relax the "Supplementary Leverage Ratio" requirements and ease certain aspects of the annual stress tests, large banks have gained confidence in returning profits to shareholders. The six largest U.S. banks increased their stock buyback scale by about 75% in the third quarter, totaling over $27 billion. Adjustments Related to Market Risk U.S. Treasury Secretary Scott Bansen previously suggested not adopting certain elements from the 2023 proposal, which required some banks to choose the stricter of two different risk capital measurement methods for compliance. The currently under-review plan framework has discarded this approach from the Biden administration. Informed sources indicated that regulators are considering adjustments to the assessment of "market risk" in the proposal, involving the measurement of risk levels related to trading, wealth management, and investment banking activities (collectively referred to as "market risk") This part of the new plan could have a significant impact on banks with large trading operations. Previously, industry organizations stated in a letter to regulators that the original proposal during the Biden administration would lead to a substantial increase in market risk capital requirements and would suppress diversified trading business models. The Federal Reserve's document may also provide guidance to regulators on how to reduce the capital requirements that banks need to allocate for "fee-based business lines," which include wealth management services and certain credit card operations