America's big banks face one of biggest regulatory overhauls since the financial crisis

financialpost.com:

Major banks are facing one of the biggest regulatory overhauls since the financial crisis, setting up a clash with Wall Street over the amount of capital that they have to set aside to weather tumult.

The Federal Reserve’s top banking regulator, Michael Barr, said that he wants banks to start using a standardized approach for estimating credit, operational and trading risks, rather than relying on their estimates. He also said that the Fed’s annual stress tests should be rejiggered to better capture dangers that firms can face. The changes stem from a review to align U.S. rules with a set of international standards, which are known as Basel III.

The plans laid out by Barr on Monday follow a months-long review of capital requirements for banks, a politically sensitive topic after several lenders including Silicon Valley Bank collapsed this year. Barr said his examination found that the current system was sound, but several changes were needed that will result in banks setting aside more money as a cushion to protect against losses.

“These changes would increase capital requirements overall, but I want to emphasize that they would principally raise capital requirements for the largest, most complex banks,” he said in a speech at the Bipartisan Policy Center in Washington. “We intend to consider comments carefully and any changes would be implemented with an appropriate phase-in,” he said, adding that most banks already have enough capital to meet the new requirements.

Since taking the job last year, Barr has signalled that he generally supports tougher restrictions for bigger, systemically important lenders. Faced with that prospect, large banks sounded a relatively cautious approach for announcing payouts after they all