The WASHINGTON Federal Reserve announced one of the most important setbacks to bank rules since President Trump made a proposal for slower capital and liquidity requirements for large American lenders.
The changes would affect major US lenders included
Capital One Financial
, and more than a dozen others. The largest US banks, including
& Co., would not see any significant regulatory changes.
The draft proposal, approved by a 3-1 vote on a Wednesday meeting of the Fed Board, would divide large banks into four categories based on their size and other risk factors. Regional lenders will either be fully freed from certain capital and liquidity needs, or see these requirements reduced. They may also, in some cases, be subjected to less frequent stress tests.
"These proposals constitute an important principle: The nature of the regulation should correspond to the character of a company," said the Fed Vice Chairman for Supervision Randal Quarles in a statement. Fed Chairman Jerome Powell also supported the proposal.
Governor Lael Brainard issued a statement that opposed the proposal, saying that policy changes "weaken buffers that are the core of the system's resilience" and increase "the risk that US taxpayers will again be on the hook."
The most important The changes in the Fed's proposal would affect banks with assets between $ 1[ads1]00 billion and $ 250 billion, a group that includes
BB & T
, SunTrust, Inc. and others. These companies will no longer have to follow the so-called liquidity coverage ratio, which requires companies to hold assets they can sell for cash in a squeeze.
The proposal will also give banks greater flexibility in how gains and losses in securities portfolios affect capital levels, which can reduce the capital they need to maintain.
These banks can also be released from the public release of Fed's annual stress tests next year. Wednesday's proposal did not directly address that question, but Mr. Quarles said he expects the Fed to move from annual public exams on these banks to a two-year cycle, by 2019 as an off-cycle year.
Banks with between $ 250 billion and $ 700 billion in assets or other companies that raise certain risk thresholds as $ 75 billion in non-banking or cross-border exposure will also receive flexibility about how their capital requirements reflect unrealized gains and losses. Under the plan, they will get a demanded target: A demand for relaxed liquidity coverage, about 70% to 85% of what they face.
This group includes U.S. Bancorp.,
PNC Financial Services Group
and Capital One Financial., which for several years have argued that Fed's liquidity rules treated them too hard.
Fed said that liquidity policy changes could reduce the amount of cash that large banks can hold around 43 billion dollars, or about 2.5% of the amount that banks have with more than $ 100 billion in assets. However, the impact will vary for some companies. Fed officials said they would continue to "stress test" the banks' liquidity and, in some cases, stress test requirements could be stricter than the rules Fed proposes to relax.
Fed officials say that the insignificant evidence of how the liquidity rule changes can affect lending. In general, a financial company that adheres to a looser liquidity rule may have greater freedom to acquire government bonds or other secure assets and expand risky and more profitable activities as loans. The company may also be able to change pricing on deposits, because the rule effectively taxes deposits as the regulator judge is likely to leave the bank in a crisis.
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