Big US banks may need to increase capital requirements
Major banks are facing one of the biggest regulatory overhauls since the financial crisis, setting up a clash over the amount of capital that they have to set aside to weather tumult.
The Federal Reserve’s top banking regulator, Michael Barr, said he wants Wall Street banks to start using a standardised approach for estimating credit, operational and trading risks, rather than relying on their own estimates.
Fed vice chairman for supervision Michael Barr. Reuters
Barr added that the Fed’s annual stress tests should be rejiggered to better capture dangers that firms can face. The changes stem from a months-long review to align US rules with a set of international standards known as Basel III.
Industry titans have long fought against higher capital requirements, and the issue became a political lightning rod 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.
The announcement arrived just days before the largest banks begin posting their second-quarter results, starting on Friday with JPMorgan Chase & Co, Citigroup and Wells Fargo & Co.
“These changes would increase capital requirements overall, but I want to emphasise that they would principally raise capital requirements for the largest, most complex banks,” he said in a speech at the Bipartisan Policy Centre 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
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