Explainer: Regulators globally are softening capital rules for banks

U.S. regulators appointed under President Trump are proposing to relax capital requirements and overhaul stress tests, while European and UK authorities have delayed parts of the Basel III Endgame and say they will largely maintain capital levels.

Regulators in major jurisdictions are moving to ease some bank capital rules as policymakers seek to keep lenders competitive and support economic activity. Seventeen years after the global financial crisis, countries are diverging in how they implement the final Basel III measures. U.S. authorities have proposed delays and rewrites of several requirements, and are reworking stress tests. European and UK regulators have paused or adjusted parts of the rules while saying they will retain core capital standards. What officials reported: - U.S. regulators are proposing changes that include tweaks to leverage rules, adjustments to the GSIB surcharge for the largest banks, and an overhaul of annual stress tests. - The European Central Bank has said it will simplify its rule book but keep overall capital levels, and the Bank of England lowered its headline system-wide capital estimate to 13% while reviewing its leverage ratio. - Comparisons across regions are complicated because risk-weighting methods differ; the article notes U.S. banks cannot use internal models for risk weightings in some cases, which affects apparent capital intensity. - Analysts cited in the article estimate potential U.S. changes could free up roughly $1 trillion of lending capacity, though banks might instead use extra capital for payouts or acquisitions. Summary: Regulatory moves in the United States point to looser capital requirements and smaller stress-test buffers, while Europe, the UK and Japan are taking more measured or differing approaches. The near-term effect may be greater excess capital at some banks, but policy details and timelines are still under review. Undetermined at this time.