By Dylan Tokar
America's biggest banks would be allowed to hold billions of dollars less in capital on their books under a series of new proposals, a change officials say will free up their ability to lend and compete with private-credit firms and other rivals.
The proposals introduced Thursday would hand a major victory to big banks, which had resisted sharply higher requirements proposed under the Biden administration. Wall Street's embrace of a second Trump administration had largely centered on the prospect that plans for those stricter requirements would be scrapped.
"An important benefit of these proposals is that they would reduce incentives for traditional lending activities -- like mortgage origination, mortgage servicing, and lending to businesses -- to migrate outside of the regulated banking sector," said Michelle Bowman, whom President Trump appointed as Fed vice chair for supervision.
Big banks received massive bailouts in the 2008-09 financial crisis , prompting policymakers to impose higher capital requirements and other tightened controls designed to protect against a future crash. The measures limited their ability to lend and helped open the door to private-credit firms and other nonbank lenders.
One proposed response -- part of an international agreement known as the Basel accords -- languished for years until a series of bank failures in 2023. The bank collapses prompted the Federal Reserve during the Biden administration to take up Basel and propose even higher capital buffers as a safety net for turbulent times.
JPMorgan Chase and other big banks waged an intense lobbying campaign to fight the tightened rules, including with TV ads during National Football League games.
Wall Street has been navigating a host of significant changes since Trump's return to the White House, including crypto-friendly regulators and accusations by the administration that banks shut out certain customers and industries for political reasons. Banks have largely steered clear of direct confrontation with the administration on many of those issues, to avoid derailing deregulatory changes they have long desired.
Lower capital requirements have long been at the top of Wall Street's list of wants.
The revisions proposed Thursday, spearheaded by the Fed, would include implementation of the Basel accords. Taken alone, the Basel proposal would create a mild increase in big banks' capital buffers. But regulators are also attempting to simplify capital rules overall and are proposing changes to other rules, including an additional capital cushion that applies to the largest banks.
Combined, the changes will amount to banks of all sizes holding less capital overall on average.
The Fed on Thursday voted 6-1 in favor of issuing the proposals, which is subject to a 60-day comment period before they can be finalized.
The changes would cumulatively let the largest banks hold on average 2.4% less capital, or roughly $20 billion less than they currently do. Prior rule changes under the Trump administration, including around big banks' stress tests, would bring that number to 4.8%, according to a Fed memo.
Midsize banks would be allowed to decrease their capital buffers by an average of 5.2%, when also accounting for stress test revisions, and smaller banks by 7.8%, the memo said. The exact capital buffer will differ for each bank.
Prior Basel proposals during the Biden administration envisioned estimated hikes of first up to 20%, then 9%, for the largest banks.
The looser rules could help banks win back business, and would come just as private-credit firms are facing turbulence after years of growth. Investors spooked by the prospect of defaults in their funds have recently rushed to redeem their money -- and found themselves turned away because of caps on how much firms will redeem in any given quarter.
In addition to the capital rules, Bowman and other Trump regulators have also moved to cut exam staff and ease bank supervision.
While the revisions proposed Thursday would finally fulfill the U.S.'s commitment to implement the Basel accords, Trump appointees are also proposing to depart in key ways from the agreement.
Fed Governor Michael Barr, who served as the central bank's vice chair for supervision under the Biden administration, was the sole dissenting vote on Thursday's proposals. Barr had championed the more stringent Basel plan.
"I fear that, if this much weaker version of Basel III is adopted in the U.S., it could trigger a race to the bottom on standards, harming the global financial system," Barr said Thursday.
Write to Dylan Tokar at dylan.tokar@wsj.com
(END) Dow Jones Newswires
March 19, 2026 12:15 ET (16:15 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
