U.S. Banking Agencies Propose New Rules to Reduce Regulatory Capital Requirements for Banks

Financial Services Regulations attorneys Jeffrey Haas, Paul Aguggia, Shawn Turner, Dimitri Nionakis and Rolland Hampton co-authored an article for The Journal of Federal Agency Action analyzing three interconnected proposals from federal banking agencies to implement reforms undertaken by the international Basel Committee on Banking Supervision (BCBS) in response to the global financial crisis. The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System (FRB) and Federal Deposit Insurance Corporation (FDIC) issued proposed rules to replace the July 2023 Basel III Endgame Framework to modernize the U.S. regulatory capital framework for banking organizations of all sizes, notably bringing activities such as mortgage origination and servicing back under the agencies' regulatory purview. Collectively, the proposals span more than 1,500 pages and touch nearly every aspect of existing capital requirements. In their article, the authors pull out several notable changes: Category I and II banking organizations will no longer have to utilize a Dual Stack Approach to calculate two sets of risk-based capital ratios, mortgage servicing assets (MSAs) will receive a risk weight instead of being subject to threshold-based decisions, and five amendments to the FRB's Global Systemically Important Bank (GSIB) adjust surcharges and Systemic Risk Reports. The article summarizes these and other provisions as well as explains how they will affect holding companies, financial institutions and other players in the financial services industry.

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