In response to a series of failures among midsize banks, U.S. regulators are preparing to introduce stricter rules for large banks, potentially raising their capital requirements by an average of 20%. The aim is to enhance the resilience of the financial system, as reported by the Wall Street Journal.
According to sources familiar with the matter cited in the WSJ report, regulators are on track to propose these changes as early as this month. The U.S. Federal Reserve’s top regulatory official had previously stated that the central bank would announce its plan to tighten capital rules for banks this summer, as well as ensure more rigorous supervision in the wake of recent bank failures.
The Wall Street Journal article also mentioned that the new capital requirements could apply to banks with assets totaling at least $100 billion. This threshold is lower than the existing requirement of $250 billion, which regulators reserve for their most stringent rules. The move aims to align the U.S. capital requirements more closely with the international Basel III standards.
Notably, banks such as Morgan Stanley and American Express, both contacted for comments by Reuters but yet to respond, could be among those affected by the proposed changes. These developments come as the authorities seek to address the vulnerabilities highlighted by the failures of smaller regional lenders.
Critics, including JPMorgan Chase & Co. CEO Jamie Dimon, have voiced concerns over the potential burdensome impact of increased capital requirements. Dimon previously referred to an upcoming increase as “bad for America.” However, the regulators appear committed to implementing stricter regulations to ensure the stability and resilience of the banking system.
As the proposals take shape, the industry will be closely watching for further details and insights from the regulatory bodies involved. The implications of these changes could significantly influence the operations and strategies of large banks in the United States.