Capitulation in Banking: New Rules from the Federal Reserve Spark Controversy

Wall Street's Influence on New Bank Rules

In a surprising turn, Wall Street's extensive lobbying has resulted in a significant shift in new bank regulations proposed by the Federal Reserve. After a year marked by opposition from both the banking lobby and bipartisan lawmakers, Michael Barr, the Fed's vice-chair for supervision, has revised the rigorous Basel III regulations aimed at safeguarding the financial system.

Regulatory Changes and Market Reactions

Initially anticipated to impose a 19% increase in capital requirements, the revised proposal now stipulates only a 9% increase, saving the largest US banks roughly $100 billion. This significant reduction raises concerns about potential risks, as banks will have increased flexibility to engage in riskier behaviors.

• New capital requirement of 9% for major banks
• Proposed savings of $100 billion for top lenders
• Reduction of operational risk regulations

Global Implications and Industry Feedback

The pushback has not been limited to the US; UK regulators are also expected to announce delays in tightening capital rules in response to industry pressures. This trend reflects a broader retreat by global regulators from stringent financial oversight. Amidst all the turmoil, industry executives are weighing their options in light of Barr's newly proposed rules.