Latest news with #capitalrequirements
Yahoo
5 days ago
- Business
- Yahoo
BofA, Morgan Stanley, U.S. Bank CFOs push for holistic capital framework review
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. At the Federal Reserve's capital framework conference Tuesday, Morgan Stanley CFO Sharon Yeshaya likened the current web of rules to a room with too many layers of paint to count. 'It feels like an old New York City apartment that they just keep painting over and over and over again. And you're sorta like, what color was this supposed to be?' she said. 'We should strip the paint and we should take a look and say, what are we trying to achieve?' One of the words mentioned repeatedly during the central bank's capital framework conference: holistic. As Trump-appointed agency heads pursue change to bank regulation, industry players also underscored the importance of finalizing a Basel III proposal. The July 2023 capital requirements proposal, intended to align the U.S. with Basel III, introduced overlaps with other requirements that weren't addressed in the initial proposed rule, Yeshaya said. Instead, considering the framework 'more holistically' is essential, she said. The Morgan Stanley CFO advocated for deciding how much capital needs to exist within the system, and then working through how banks allocate that capital appropriately to risks being run on a day-to-day basis. 'I don't think it's about gaming the system,' Yeshaya said. 'We're not trying to bring ourselves down.' 'We need to kind of get past the last 20 years and say that there isn't an intention to fail,' Yeshaya added, noting that banks endure reviews and challenges, and work to make changes after undergoing stress tests. The 'first-of-its-kind conference' Tuesday brought together industry players, academics, analysts, former regulators and other stakeholders to discuss the elements of the capital framework for large banks and where adjustments can be made, said Michelle Bowman, the Fed's vice chair for supervision, who orchestrated the event. The capital framework for U.S. lenders features risk-based capital requirements, leverage requirements, stress testing and the capital surcharge for the biggest, most complex banks. Currently, there are outstanding or in-development proposals on all four, and each was discussed Tuesday. Banks have advocated for less severe capital requirements because they say it affects lending, while supporters of more robust rules warn weaker regulations could tee up another financial crisis. As the all-day event wrapped up, Bowman told panelists 'we'll be calling on you, I know, as we're working on developing some of these ideas and thinking more deeply about some of the thoughts that you all have shared with us today.' With Trump-appointed heads in place at banking agencies and eager to make adjustments, Matthew Bisanz, a partner at law firm Mayer Brown, said he expects meaningful change to the capital framework. Tuesday's event 'changed my view that we will see a reproposal of Basel endgame later this year,' he said. 'I think that went from being a possibility to being the base case.' Bank regulators' 2023 proposal, which would have increased by 19% the amount of capital the largest banks would have had to hold, drew swift industry pushback. That Biden-era proposal was revamped last year, dropping the increase to 9%, although that reportedly faced criticism from both Democratic and Republican regulatory officials. The proposal was effectively shelved with the election of President Donald Trump. Big bank CFOs, in the conference's final panel Tuesday, weighed in on potential areas of capital framework reform, calling for transparency, efficiency and a comprehensive approach. Each of the individual capital rules is 'well intended' and designed for safety, Bank of America CFO Alastair Borthwick said Tuesday. If there were only one rule, then some conservatism would be expected. But the interrelation of the rules becomes 'important to us as practitioners, because we're managing all of them,' said the finance chief of the country's second-largest bank. In total, these rules tend to get 'more conservative, because they're greater than the sum of the individual rule.' As banks are faced with capital decisions, whether in stress tests or proposals such as Basel III, there are risk-weight considerations, said U.S. Bank CFO John Stern. When lenders allocate capital to business lines and have to make pricing decisions, 'it can really impact how we go to market, how it impacts clients, how it impacts our conversations with clients,' he said. 'That's really meaningful.' When it comes to regulators' to-do list, Bisanz noted that capital framework changes may have to take a back seat to stablecoin rules, since the GENIUS Act has rulemaking associated with it, which bank agencies must take action on. Recommended Reading OpenAI's Altman didn't expect banks to take to AI so soon Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-07-2025
- Business
- Yahoo
Fed officials, banking experts discuss regulatory rewrite effort at conference
By Pete Schroeder WASHINGTON (Reuters) - The Federal Reserve continued work on its comprehensive effort to rewrite bank rules with a daylong conference at its headquarters on Tuesday. At the conference in Washington, regulatory officials, bankers, industry lawyers and other experts discussed a range of tougher bank rules put in place after the 2008 financial crisis, and ways to refine them. The outcome could save large banks billions of dollars in capital costs, which they argue would free them to engage in more lending and other activities, but skeptics warn could make banks less resilient in future shocks. "We need to ensure that all the different pieces of the capital framework work together effectively. Doing so will help maintain a safe, sound, and efficient banking system, for the benefit of the people we serve," Fed Chair Jerome Powell said in introductory remarks. The event was pushed by Fed Vice Chair for Supervision Michelle Bowman, who stepped into the U.S. central bank's top regulatory post in June after being nominated for the role by President Donald Trump. Bowman, a member of the Fed's Board of Governors since 2018, has charted an ambitious agenda to reconsider a raft of longstanding bank requirements. The conference tackled nearly every major bank capital requirement imposed by the Fed and other U.S. bank regulators following the crisis 17 years ago, including leverage requirements, additional surcharges imposed on large global banks, and annual "stress tests" of large bank finances. Banks have increasingly complained over the years that the rules have become unnecessarily onerous and outdated, which has helped push financial activity out of the traditional banking sector into less heavily regulated non-banks. "It's really about striking that balance between economic growth and safety and soundness," said Sheara Fredman, chief accounting officer at Goldman Sachs. Many of those rules are being rewritten by regulators, or officials have discussed potential changes. The industry garnered a major victory last year when it effectively sidelined an effort to overhaul how banks gauge their risk known as the "Basel III endgame," which would have drastically raised large banks' capital requirements. Banks intensely lobbied against the initiative, which was pushed by Bowman's predecessor, Fed Governor Michael Barr. On Tuesday, much of the conversation was aimed at how remaining rules could be changed to ease bank burdens, including by advancing a new version of the Basel framework that minimizes the capital impact of new risk measurements. Sign in to access your portfolio
Reuters
22-07-2025
- Business
- Reuters
Fed officials, banking experts discuss regulatory rewrite effort at conference
WASHINGTON, July 22 (Reuters) - The Federal Reserve continued work on its comprehensive effort to rewrite bank rules with a daylong conference at its headquarters on Tuesday. At the conference in Washington, regulatory officials, bankers, industry lawyers and other experts discussed a range of tougher bank rules put in place after the 2008 financial crisis, and ways to refine them. The outcome could save large banks billions of dollars in capital costs, which they argue would free them to engage in more lending and other activities, but skeptics warn could make banks less resilient in future shocks. "We need to ensure that all the different pieces of the capital framework work together effectively. Doing so will help maintain a safe, sound, and efficient banking system, for the benefit of the people we serve," Fed Chair Jerome Powell said in introductory remarks. The event was pushed by Fed Vice Chair for Supervision Michelle Bowman, who stepped into the U.S. central bank's top regulatory post in June after being nominated for the role by President Donald Trump. Bowman, a member of the Fed's Board of Governors since 2018, has charted an ambitious agenda to reconsider a raft of longstanding bank requirements. The conference tackled nearly every major bank capital requirement imposed by the Fed and other U.S. bank regulators following the crisis 17 years ago, including leverage requirements, additional surcharges imposed on large global banks, and annual "stress tests" of large bank finances. Banks have increasingly complained over the years that the rules have become unnecessarily onerous and outdated, which has helped push financial activity out of the traditional banking sector into less heavily regulated non-banks. "It's really about striking that balance between economic growth and safety and soundness," said Sheara Fredman, chief accounting officer at Goldman Sachs. Many of those rules are being rewritten by regulators, or officials have discussed potential changes. The industry garnered a major victory last year when it effectively sidelined an effort to overhaul how banks gauge their risk known as the "Basel III endgame," which would have drastically raised large banks' capital requirements. Banks intensely lobbied against the initiative, which was pushed by Bowman's predecessor, Fed Governor Michael Barr. On Tuesday, much of the conversation was aimed at how remaining rules could be changed to ease bank burdens, including by advancing a new version of the Basel framework that minimizes the capital impact of new risk measurements.
Bloomberg
22-07-2025
- Business
- Bloomberg
Third of Nigeria Banks Meet Capital Requirements Before Deadline
Nigeria's central bank said about a third of lenders have met its new capital requirements threshold ahead of a March deadline. 'Eight banks have fully met the recapitalization requirements, while others are making progress towards meeting the deadline,' Governor Olayemi Cardoso said at briefing in the capital, Abuja on Tuesday, to announce the central bank's interest-rate decision. The country has 26 commercial lenders, data on the central bank's website shows.
Yahoo
22-07-2025
- Business
- Yahoo
Banks Ready Fresh Push Against Tighter US Capital Rules
(Bloomberg) -- Wall Street lenders and their lobbyists are descending on the Federal Reserve's first-of-its kind banking conference Tuesday with a broad ask of the new vice chair for supervision: Steer clear of stricter capital requirements. Why the Federal Reserve's Building Renovation Costs $2.5 Billion Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom Milan Corruption Probe Casts Shadow Over Property Boom How San Jose's Mayor Is Working to Build an AI Capital Senior officials from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley are expected to use the event to detail a host of rule changes they'd like to see from regulators. Hot-button issues include the landmark risk-based plan known as Basel III endgame, the stress-testing framework and the capital surcharge for big banks. The conference is the brainchild of the Fed's new top bank cop, Michelle Bowman, who was confirmed last month after being lauded by banks for her drive to curtail rules and tailor supervision. It will effectively kick off her promise to reverse what she sees as a flawed approach to capital rules. Regulators have already been looking to dial back some requirements, unveiling a proposal in June to ease a key rule known as the enhanced supplementary leverage ratio. The Fed is also in the process of overhauling its stress tests, which gauge how large banks would fare during a hypothetical recession. Bowman is expected to help craft a new proposal tied to the so-called Basel III endgame. She was a sharp critic of the plan as originally drafted, which would have increased the biggest banks' capital requirements by 19% to buffer against losses and a financial crisis. The Fed later walked back that proposal. Treasury Secretary Scott Bessent on Monday pointed to that Biden-era bank capital proposal, which would have used two different methodologies when calculating risk-weighted assets. He said that instead of requiring banks to use whichever methodology resulted in a higher level of those assets, one possible option would be to give each bank that is not subject to the modernized requirements the choice to opt-in. 'This would result in a meaningful reduction in capital for those banks,' Bessent said in prepared remarks. Questions remain about whether final rule outcomes will resemble more of a capital-neutral standard, which some say would ease US requirements and put them more in line with international regulations, or go beyond that to significantly reduce the capital threshold for the largest banks. Fed Chair Jerome Powell underscored Tuesday the need for the banking system's capital framework to work together effectively, and for banks to be well-capitalized and to manage their risks well. He added that competition is also crucial for the industry. 'We need large banks to be free to compete with one another, with nonbank financial firms, and with banks in other jurisdictions to provide capital and support economic growth,' Powell said in prepared remarks. Supporters of tougher requirements, including Biden-era regulators, say the benefits of stricter capital requirements would outweigh their costs, by ensuring banks' solvency even in the worst foreseeable circumstances. Industry groups have frequently criticized the rules though, saying they raise the costs of lending and put US banks on weaker footing against international rivals. Noting the need for a more transparent approach to reforms, Bowman — who President Donald Trump nominated — has billed the forum as a way to spark 'expert discussions on whether capital requirements are operating as intended.' It includes panels with bank officials, attorneys and academics in addition to a conversation with OpenAI chief Sam Altman. Ian Katz, a bank analyst and managing director at Capital Alpha Partners in Washington, touts the event as crucial in helping the Fed think through some specific details, including how all the measures work together. 'I think we end up with rules closer to capital neutral,' said Katz, adding that the voices in the room play a key role in shaping overall outcomes. Andrew Olmem, the Washington—based managing partner at law firm Mayer Brown, said the conference shows how Bowman will make an effort to build consensus with industry, other financial regulators and the public about the future of capital standards before new rules are adopted, especially given the complexity and interconnectedness of such reform. But some critics dismiss the event as merely window dressing as the administration pursues the deregulation agenda Trump campaigned on last year. Graham Steele, a Fed alumnus who served as a Biden-era Treasury official, described the conference as a Fed listening session with mostly bankers and other detractors of regulation that will result in weaker rules for Wall Street. 'They'll try to couch deregulation in neutral-sounding language about 'tailoring' or 'efficiency,' but those are just buzzwords for lower capital and leverage requirements, less stringent stress testing, and weaker supervision and enforcement,' Steele said. 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