On July 27, 2023, three bank regulatory agencies requested comments on a proposal to increase the strength and resilience of the banking system. The proposal would modify large bank capital requirements to better reflect underlying risks and increase the consistency of how banks measure their risks.
According to the Federal Reserve Board’s press release, the proposal seeks to further strengthen the banking system by applying a broader set of capital requirements to more large banks. The proposal would generally apply to banks with $100 billion or more in total assets.
The proposal, if approved, would do the following:
Standardize aspects of the capital framework related to credit risk, market risk, operational risk, and financial derivative risk;
Require banks to include unrealized gains and losses from certain securities in their capital ratios;
These banks would also be subject to the supplementary leverage ratio and the countercyclical capital buffer, if activated; and
Require large banks to begin transitioning to the new framework on July 1, 2025, with full compliance starting July 1, 2028.
Community banks would not be impacted by this proposal.
Read the FRB’s press release here.