Eight industry executives in regular touch with the agencies and regulatory officials expect U.S. regulators to dramatically lower banks' excess capital under a proposed rule that has garnered intense Wall Street resistance.
In July, Federal Reserve-led bank regulators proposed "Basel III" to change how banks with more than $100 billion in assets assess their loss-absorbing reserves.
For over three dozen impacted lenders, the agencies said they would enhance aggregate capital by 16%. The people claimed regulators' massive draft rewrite will lower that amount considerably.
The people claimed regulatory discussions are early and no decisions have been made. The agencies said they are evaluating hundreds of public comments and bank data on the proposal's impact.
The costliest plank of the proposal, changes to way banks assess operational risk losses, will save the most capital, three individuals said. Banks pushed authorities to lower risk weights for fee income from lending services like investment banking.
The people also demand officials to eliminate greater risk weights on low-income mortgages and renewable energy tax subsidies. Three sources claimed Fed Vice Chair for Supervision Michael Barr and Fed Chair Jerome Powell are reworking the proposal. One senior official said Powell, who testified Wednesday before Congress, wants "significant" adjustments.
Private regulatory problems were discussed anonymously by the official and others. Fed officials declined comment. The new regulation will likely involve "broad, material" modifications, Powell told lawmakers Wednesday.
Barr has said he will explore revisions to mortgage weights and operational risk assessments, but this is the first time the agency's capital reduction and other specifics are being revealed.
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