Federal Reserve Board votes to publish three bank-capital proposals for public comment

The Federal Reserve Board voted to publish three proposals for notice and comment that would revise how U.S. banks calculate regulatory capital, the board announced after a public staff presentation and discussion. The package includes a Basel 3-oriented rule for the largest, internationally active banks; a revision to the U.S. method for determining GIB (global systemically important banking organization) surcharges; and changes to the standardized risk-based capital approach that applies to many other banks.

Board staff outlined the intended effects: streamline risk-based calculations for the largest banks by implementing an expanded risk-based approach, increase risk sensitivity for credit and operational risks, refine market-risk methodologies, and change how the GIB surcharge measures certain indicators such as short-term wholesale funding (staff proposed measuring that component in dollar terms and recalibrating its weight to 20%). Staff projected that, in the aggregate, the proposals and related stress-testing adjustments would modestly lower common equity Tier 1 requirements for the largest banks (staff cited a 2.4% decrease from certain elements and a combined reduction near 4.8% when paired with stress-test changes) and estimated a systemwide tier-one capital reduction of roughly $117 billion (about a bit less than 6% of aggregate tier-one capital).

Why it matters: The proposals would reshape capital incentives across the banking system—potentially easing some capital charges that critics say discouraged traditional lending (including mortgage origination and servicing) while altering how the board measures systemic risk for the largest firms. Proponents said the changes improve risk alignment and reduce unintended regulatory overlap; opponents warned they could weaken resilience.

Dissent and debate: Governor Bar issued a formal objection, arguing the cumulative effect of the package would materially weaken capital requirements for the largest banks and that some recalibrations (including a one-time downward adjustment to certain GIB method-2 coefficients and reducing the weight of short-term wholesale funding) are insufficiently justified. In his statement he said, “These significant reductions in capital requirements are unnecessary and unwise” and urged more principled, risk-based calibration. Staff and other board members replied with technical justifications, described cross-model offsets (for example between revised risk-based rules and stress tests), and noted that some changes aim to reduce incentives for banks to shift lending outside the regulated banking sector.

Votes at a glance: The board approved all three items by roll call, with the same 6–1 split on each measure: Vice Chair Jefferson — yes; Vice Chair for Supervision Bowman — yes; Governor Waller — yes; Governor Cook — yes; Governor Bar — no; Governor Myron — yes; Chair Pal — yes. The motions were to approve issuance for notice and comment and to allow staff to make minor non-substantive edits before publication.

Next steps: Each proposal will be published in the Federal Register for public comment. Board staff invited feedback on calibration choices, measurement methods (including the GIB indicator changes), and the proposals’ potential effects on lending to low- and moderate-income households and small businesses. The board encouraged members of the public and stakeholders to submit comment letters during the rulemaking periods.

The meeting concluded after the votes and public comment solicitation; no final rule was adopted at this meeting.