Regulators propose raising capital requirements for largest US banks by 16%

investmentweek.co.uk:

The proposals were issued by the US Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation on Thursday (27 July).

The proposals, issued by the US Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation on Thursday (27 July), are estimated to result in a 16% increase in common equity tier 1 capital requirements for banks, with the increase mainly affecting the largest and most complex banks. 

The rules will apply to banks with more than $100bn in total consolidated assets. For banks below $100bn in total assets, the market risk provisions of the proposal would also apply to those with significant trading activity. 

«The effects would vary for each bank based on its activities and risk profile. Most banks currently would have enough capital today to meet the proposed requirements,» the FDIC said. 

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Regulators said banks would have until the start of 2028 to fully comply with the requirements. This would give lenders «sufficient time to adjust to the changes while minimising any potential adverse impact».

The proposal implements the final components of the Basel III agreement, also known as Basel III Endgame, and include changes in response to the recent banking turmoil in March. 

Large bank capital requirements would be modified to «better reflect underlying risks» and «increase the transparency and consistency» of the regulatory capital framework, the regulators said. 

The capital framework will be revised in four main areas: credit risk, market risk, operational risk and credit valuation adjustment risk. Moreover, regulators will also introduce an