Fed Considering Rule Change to Save Big Banks Billions in Capital

The U.S. Federal Reserve is contemplating a rule change that could save the country's eight largest banks billions in capital. The central bank is reviewing how it calculates the 'GSIB surcharge' to better reflect economic growth. The deliberations could significantly reduce the capital on account for these banks.

The U.S. Federal Reserve is reviewing a potential rule change that could save the country's eight largest banks billions in capital, according to sources. The change focuses on updating how the central bank calculates the 'GSIB surcharge,' initially set in 2015, to better reflect economic growth.

The deliberations offer a significant opportunity for U.S. global systemically important banks (GSIBs) to reduce their capital surcharge. The update would adjust the coefficients used in calculating the surcharge, potentially leading to a reduction in the capital these banks hold, which stood at $230 billion in Q1 2024.

This move could ease the financial burden on banks such as JPMorgan and Bank of America, enabling them to reinvest saved capital into the economy. This review marks progress for GSIBs, who have long campaigned for such regulatory changes. The Fed is expected to seek public feedback before making any final decisions.