Exclusive: US Fed has told big banks not to push back aggressively on new capital rules

• The revised rules represent a major industry victory after fierce lobbying, reducing the proposed capital impact from a 20% increase to a 4.8% decrease
• JPMorgan, the largest U.S. bank, will actually see its capital requirements increase by about 4% under the plan, highlighting uneven distribution of benefits
• Fed officials have conveyed in private meetings that they worked hard to address bank complaints and do not expect banks to repeat the aggressive tactics used against the 2023 proposal

Summary

The Federal Reserve's Vice Chair for Supervision Michelle Bowman has warned major U.S. banks against mounting an aggressive campaign to further weaken newly proposed capital requirements, according to sources familiar with the communications.

Key Developments:

In March, the Fed unveiled revised "Basel III" and "GSIB surcharge" rules that would reduce capital levels at large U.S. banks by approximately 4.8%—a significant retreat from the original 2023 proposal that called for 20% capital increases. This represents a major victory for the banking industry following fierce lobbying efforts.

Uneven Impact:

Despite overall relief, the benefits are not uniformly distributed. JPMorgan, the nation's largest bank, reported Tuesday that its capital requirements would actually increase by around 4% under the new framework, highlighting disparities in how the rules affect individual institutions.

Fed's Message:

In recent meetings with bank executives, Bowman and other Fed officials have conveyed that they worked extensively to address industry concerns and expect only limited, specific feedback during the formal 90-day comment period ending mid-June. The Fed has made clear it does not anticipate a repeat of the aggressive pushback tactics deployed against the 2023 proposal.

Market Implications:

The Fed's preemptive warning signals regulatory fatigue and suggests the current proposal is likely near-final form. Banks seeking additional relief may face resistance, though some executives indicated during this week's earnings calls they would pursue targeted changes. The finalized rules will significantly impact bank capital allocation, lending capacity, and shareholder returns.