Fed Signals Adjustments to Bank Capital Rules

(MENAFN) A senior official at the Federal Reserve indicated that the US central bank is preparing modifications to banks’ capital obligations.

Addressing a Thursday policy forum organized by the Cato Institute, US Federal Reserve Vice Chair for Supervision Michelle Bowman emphasized that capital requirements continue to serve as a foundational element of the prudential regulatory structure.

She highlighted that the Fed intends to introduce rules in the coming weeks to implement the concluding phase of the Basel III standards in the United States.

“These changes to the capital framework eliminate overlapping requirements, right-size calibrations to match actual risk, and comprehensively address long-standing gaps in our prudential framework,” Bowman stated.

Bowman further noted that regulators have formulated proposals to amend four primary aspects of the regulatory capital framework for major banks: stress testing, the supplementary leverage ratio, risk-based capital requirements under Basel III, and the surcharge applied to Global Systemically Important Banks.

She warned that continually raising capital levels without a defined purpose can create burdens for the real economy, cautioning that overly stringent capital requirements could weaken banks’ capacity to extend credit.

Bowman also mentioned that the Fed is moving to modernize capital regulations and is collaborating with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to jointly advance rulemaking adjustments.

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