Lawmakers express concern about the unclear state of capital needs
The Securities Industry and Financial Markets Association (SIFMA) has raised concerns about a reworked capital requirements proposal published by U.S. regulators on July 10, 2025. The proposal targets banking organizations' capital markets activities for significant increases, specifically forcing the largest U.S. banks to hold 9% more capital, rather than the proposed 19%.
The new proposal represents a departure from the 2023 Basel III-based proposal, aiming for modernization, simplification, and consultation. Comments on this new proposal were due by August 26, 2025. Kenneth E. Bentsen Jr., the CEO of SIFMA, expressed eagerness to see the reproposal and quantitative impact study conducted.
Treasury Secretary Scott Bessent and the Federal Reserve have shown support for reform favoring modernization and easing capital burdens, especially for community banks. Bessent advocated for allowing smaller banks an opt-in to these modernized standards to reduce their capital costs, signaling high-level backing for reform that is more inclusive and less burdensome.
While the FDIC is active in regulatory governance, explicit recent support or opposition to this specific capital rule by the Office of the Comptroller of the Currency (OCC) or FDIC in public sources is not clearly documented, though regulatory engagement continues. The FDIC recently proposed establishing an Office of Supervisory Appeals, indicating ongoing regulatory-development activities.
Republican lawmakers criticized the proposal that would require banks to hold more capital during a House subcommittee hearing. Andy Barr, chairman of the financial institutions and monetary policy subcommittee, expressed uncertainty about the future of the capital requirements rule. Michael Barr, the subcommittee’s ranking member, expressed interest in the areas of bank operations responsible for the proposed capital increase.
Michael Barr's remarks provided numbers without underlying details, and there's no indication that new proposals are being voted on "soon" at the central bank. The Bank of England this month announced a 1% increase in tier 1 capital as part of its capital reform effort.
Jonathan Gould, a partner at law firm Jones Day, noted that it's highly irregular for regulators to repropose only a portion of the rule, rather than all of it. A potential concern raised by Bentsen is why regulators are pursuing a 9% increase when other jurisdictions are moving toward a capital-neutral stance.
Until regulators offer more clarity, those in the industry are left "gaming out various scenarios and timelines," according to Gould. Rep. Bill Foster, D-IL, described Wednesday's hearing as "premature" due to the absence of a reproposed capital requirements rule. The future rules of the road for banks remain uncertain.
[1] The reworked capital requirements proposal was published on July 10, 2025, with stakeholder comments due by August 26, 2025. [2] The FDIC recently proposed establishing an Office of Supervisory Appeals, indicating ongoing regulatory-development activities. [3] Treasury Secretary Scott Bessent publicly criticized the 2023 dual-capital-requirement approach as flawed and expressed support for a modernized, single set of capital standards that could benefit all banks, including community banks. [5] Bessent advocated for allowing smaller banks an opt-in to these modernized standards to reduce their capital costs, signaling high-level backing for reform that is more inclusive and less burdensome.
- Stakeholders have until August 26, 2025, to comment on the reworked capital requirements proposal that was published on July 10, 2025.
- The Federal Deposit Insurance Corporation (FDIC) recently proposed establishing an Office of Supervisory Appeals, showing ongoing regulatory development activities.
- Treasury Secretary Scott Bessent publicly criticized the 2023 dual-capital-requirement approach and expressed support for a modernized, single set of capital standards that could benefit all banks, including community banks, including an opt-in for smaller banks to reduce their capital costs.
