Three major US banking regulators have unveiled a sweeping set of proposals aimed at modernizing capital requirements for various financial institutions. The proposals, jointly issued by the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency (OCC), are open for public comment until June 18, 2026.
Simplified Risk-Sensitive Framework for Large Institutions
Under the first proposal, the largest, internationally active US banks would be required to adopt a unified approach to calculating risk-weighted assets, replacing the current dual framework. This change is intended to streamline compliance and enhance the precision of risk assessments.
The new rules will more closely align capital requirements with credit, market, and operational risks. Banks engaging in significant trading activities will be subject to revised market risk rules, while others may opt in. The goal is to reduce unnecessary burdens on smaller market participants while making the overall capital framework more responsive to actual risks.
The FDIC is a US government agency responsible for deposit insurance and the supervision of financial institutions; the Federal Reserve Board, as the nation's central bank, oversees monetary policy and financial stability; and the OCC regulates and supervises national banks and federal savings associations.
Adjustments for Smaller Lenders
A second proposal is tailored for small and mid-sized banks, specifically those not classified as the largest institutions. This proposal revises how capital is allocated for routine lending activities, aiming for a more accurate reflection of the risks inherent in these operations.
Changes will also impact capital requirements related to mortgage servicing and adjust the standards for adhering to the community bank leverage ratio. Another requirement mandates that certain larger banks consider unrealized gains and losses on their securities holdings in their regulatory capital calculations. This update, to be implemented in phases, seeks to provide a more realistic picture of financial health and reduce negative incentives associated with mortgages.
In a joint statement, the agencies noted that these comprehensive changes would lead to a modest decrease in required capital for the largest institutions, while smaller banks focused on traditional lending would experience a more moderate reduction. They emphasized that all capital levels would remain significantly above those seen before the 2008 global financial crisis.
Systemic Risk Buffer Rules Under Discussion
A separate proposal, drafted solely by the Federal Reserve Board, focuses on assessing systemic risk for large banks. If adopted, it would alter the formula for calculating the additional capital required for the most complex banking organizations. This revision aims to ensure the buffer is appropriately sized to effectively address risks.