Banking and Finance Law Daily Wrap Up, FEDERAL RESERVE SYSTEM—Fed to revise capital requirements, (Mar 13, 2026)

By Nora Macaluso

Banking groups welcomed the central bank’s plans, which Fed Vice Chair for Supervision Michelle Bowman outlined in a speech in Washington.

The Federal Reserve will propose rules implementing Basel III capital requirements and the surcharge for global systemically important banks (G-SIBs), Fed Vice Chair for Supervision Michelle Bowman said. The Basel III proposals “streamline the risk-based capital framework using a single set of calculations, improve alignment between requirements and risk, and revise the G-SIB surcharge to better capture the risks of our largest and most complex banks," Bowman said in remarks prepared for delivery at the Cato Institute.

“We are also updating capital requirements for smaller and less complex banks,” taking a “new ‘standardized approach’,” she said.

The changes “will better align requirements with risk and allow banks to engage in lower-risk, traditional banking activities,” said Bowman. “Collectively, they reduce incentives for activities like mortgage origination, mortgage servicing, and lending to businesses to migrate outside of the regulated banking sector.”

Banks, she said, will “maintain their capacity to absorb losses while continuing to provide credit and financial services to households and businesses across a wide range of economic conditions.”

Bowman said the Basel III proposal eliminates “duplicative” requirements for the largest banks, establishing a “single approach” for calculating risk-based capital requirements. It also standardizes requirements for operational risk that are “tailored to large U.S. banks,” allowing them to account for revenues and costs for fee-based activities like credit cards on a net basis, rather than separately, and calls for a methodology for trading activities that is “calibrated to unique U.S. capital markets,” she said.

“We expect the Basel III proposal to result in a small increase in requirements for the largest banks, similar to what is expected in the UK,” said Bowman. “The G-SIB surcharge proposal would result in a modest decrease in the surcharges, which addresses the recent increases in this requirement that deviated from risk. Together, these proposals would decrease the requirements by a small amount.”

“Smaller banks, which are more focused on traditional lending activities, will see slightly larger reductions in capital requirements,” said Bowman. “These changes will maintain resilience and provide flexibility to provide credit to U.S. households and businesses.”

The Fed Board of Governors will meet March 19 to consider the changes, according to the Fed’s notice.

Banking groups praise the plan. "Vice Chair Bowman's recent remarks reflect a thoughtful, bottom-up approach towards addressing the concerns reflected in the 97 percent of commenters who identified issues with the previous Basel proposal,” the American Bankers Association (ABA), Bank Policy Institute (BPI), and Financial Services Forum said in a joint statement.

“We have consistently called for a capital framework that reflects the actual risks in the banking system, rather than over-calibrated requirements that impede economic growth and unnecessarily drive up costs,” the groups said. “The capital proposal outlined today suggests a welcome focus on risk-sensitivity and a comprehensive view, taking into account the cumulative effects of all capital requirements.”

“Thank you to Vice Chair Bowman for recognizing an important reality: capital requirements should be strong and resilient while also reflecting the actual risks in the banking system,” the Consumer Bankers Association (CBA) said in a separate statement. “A well-calibrated framework is essential not only for financial stability, but for ensuring America’s leading Main Street banks can continue meeting the needs of the consumers and communities they serve.”

“We appreciate the Vice Chair's focus on a more transparent and risk-sensitive capital framework,” the CBA said.

The banking groups said they look forward to reviewing the full proposal. “As with previous proposals, the details will matter,” the ABA, BPI, and Financial Services Forum said in their statement.

Companies: American Bankers Association; Bank Policy Institute; Consumer Bankers Association; Financial Services Forum

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