Big banks have been pressing US regulators to reconsider a controversial rule requiring them to hold greater buffers against future losses, and this week they got what they wanted.
Federal Reserve Chair Jay Powell and FDIC Chair Martin Gruenberg both said Thursday they anticipate changes to the rule following pushback from lenders, community groups, Republicans, and even some Democrats.
Powell told Senate lawmakers that “I expect there will be material and broad changes,” and “we won’t hesitate” to re-propose the rule if that makes sense — repeating a point he made to House lawmakers Wednesday.
Gruenberg told reporters separately “I certainly think we anticipate making changes in the final rule based on the extensive comments that we’ve received.”
The concerns about the capital rule — the most aggressive change to how banks are regulated since the aftermath of the 2008 financial crisis — range from harm it could do to the US economy to ways in which it would reduce access to mortgages for disadvantaged home buyers.
The willingness of regulators to change what they already proposed highlights the increased sway that big banks have in Washington, a sharp contrast to the harsh political scrutiny they received in the aftermath of the 2008 financial crisis.
“We also see this as potentially marking an important inflection point whereby the regulatory burden levied on the largest banks” after the 2008 crisis “could be nearing a peak,” Ebrahim Poonawala, a bank analyst for Bank of America, said in a note this week.
Senator Elizabeth Warren (D-Mass.) on Thursday accused Powell of flip-flopping on tougher capital rules after pledging last year to be more aggressive with supervision following the failures of several mid-sized lenders such as Silicon Valley Bank.
“You have gone weak-kneed on this,” she told Powell during a Senate Banking Committee hearing.
Powell said the capital rule — known as Basel III — is not directly related to what happened to Silicon Valley Bank and that the Fed is taking other steps to heighten supervision of specific banks.
