What's happened
Recent regulatory changes in the US and UK are reshaping banking capital requirements. The Federal Reserve has revised its Basel III endgame proposal, easing capital requirements for large banks. Meanwhile, the Bank of England has also reduced capital buffer expectations, aiming to bolster economic growth while maintaining financial stability.
Why it matters
What the papers say
According to Axios, the Federal Reserve's Michael Barr acknowledged the need for balance in capital requirements, stating, "There are benefits and costs to increasing capital requirements." Meanwhile, the New York Times highlighted that the revised rules will largely erase extra requirements on banks with assets between $100 billion and $250 billion, reflecting significant pushback from the banking industry. The Independent reported that the Bank of England's changes aim to support lending to SMEs, which is crucial for economic growth. This sentiment was echoed by Rachel Reeves, who emphasized the importance of banks in supporting business growth and infrastructure development.
How we got here
The Basel III framework was established post-2008 financial crisis to ensure banks maintain sufficient capital buffers. Recent events, including regional bank failures and lobbying from the banking sector, have prompted regulators to reconsider the stringency of these requirements.
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More on these topics
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The Federal Reserve System is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics led to the desire for central control of the m
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Basel III is a global, voluntary regulatory framework on bank capital adequacy, stress testing, and market liquidity risk. This third installment of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the fi
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Rachel Jane Reeves is a British Labour Party politician serving as Shadow Chancellor of the Duchy of Lancaster and Shadow Minister for the Cabinet Office since 2020. She has been the Member of Parliament for Leeds West since 2010.
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The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based.