Overview
- Federal Reserve, FDIC and OCC released coordinated proposals covering Basel III implementation for large banks, a revised GSIB surcharge, and updates to the U.S. standardized approach, opening a 90-day comment period through June 18.
- The Fed Board approved moving forward in a 6–1 vote, with Governor Michael Barr dissenting over concerns the reductions are unnecessary and could weaken banks’ resilience, while Chair Jerome Powell and Vice Chair Michelle Bowman backed seeking comments.
- Fed staff estimate net Common Equity Tier 1 requirements would fall about 4.8% for the largest banks, 5.2% for midsize institutions and 7.8% for smaller banks, potentially freeing billions of dollars for lending, buybacks and dividends.
- The Basel proposal drops the dual-stack calculation and allows certain internal models for market risk, while the GSIB plan would index surcharge inputs to economic growth, lessen the weight of short-term wholesale funding and shift to averaged data rather than year-end snapshots.
- Mortgage-related changes would replace the capital deduction for mortgage servicing assets with a 250% risk weight and extend recognition of unrealized securities losses to more large regionals, as analysts say trading-heavy firms such as Goldman Sachs and Morgan Stanley could be relative winners.