The Federal Reserve voted Thursday morning to formally release a sweeping package of proposed bank capital reforms, launching a 90-day public comment period on changes that would modestly reduce capital requirements for the largest U.S. financial institutions — and more substantially ease the burden on smaller regional banks. The proposals represent the most significant overhaul of post-2008 bank capital rules in years, a clear victory for Wall Street institutions that had lobbied against an earlier, stricter version.
Bowman’s 'Four Pillars' Overhaul
The package, previewed by Fed Vice Chair for Supervision Michelle Bowman in a March 12 speech, spans what she called the four pillars of regulatory capital: stress testing, the enhanced supplementary leverage ratio (eSLR), the Basel III endgame rules, and the G-SIB surcharge for globally systemic banks. Large banks would see a net capital decrease “by a small amount,” while smaller community banks focused on traditional lending would get “slightly larger reductions.” For institutions like JPMorgan Chase and Goldman Sachs, modest increases from revised Basel III calculations would be more than offset by a recalibrated G-SIB surcharge — one Bowman argued had grown disproportionate to actual risk.
eSLR Reform Frees Up $219 Billion in Capital
The eSLR revisions are especially significant. A final rule approved by the FDIC and Fed in November 2025 (effective April 1, 2026) already replaced the existing 2% eSLR buffer for G-SIBs with a buffer equal to half of each firm’s Method 1 G-SIB surcharge, capped at 1% for subsidiaries. FDIC staff estimated that change alone would reduce aggregate Tier 1 capital requirements by $13 billion (under 2%) for G-SIBs and by $219 billion (28%) for major bank subsidiaries. The new proposals extend that logic across Basel III and G-SIB surcharge frameworks.
Industry Cheers, Critics Warn of Risk
The American Bankers Association, Financial Services Forum, and Bank Policy Institute issued a joint statement praising Bowman’s approach as “a thoughtful, bottom-up resolution” to concerns raised by 97% of commenters on the prior Basel proposal. Critics, however, argue that loosening capital buffers amid elevated macro uncertainty — the Fed held rates at 3.5%–3.75% on Wednesday and raised its 2026 inflation forecast to 2.7% — undermines prudential safeguards. Bowman provided no implementation timeline beyond the 90-day comment process.