US financial regulators are poised to significantly soften proposed bank capital rules, a move that could boost lending and market activity across Wall Street.
A recent report from Bloomberg Law indicates that a multi-part package, including a revised Basel III Endgame proposal, could be unveiled as soon as next week. This isn't a sudden change of heart; rather, it's the culmination of a deliberate, year-long policy shift. The market's reaction has been muted so far, suggesting investors are waiting for concrete details, but the implications are significant for the financial sector.
So, how did we get here? The story unfolds in a clear sequence. First, the groundwork was laid in late 2025 when regulators finalized changes to the Supplementary Leverage Ratio (SLR). The original, stricter SLR was seen as a blunt tool that discouraged banks from holding low-risk assets like US Treasuries. By redesigning it to be more of a backstop, regulators shifted the primary constraint on banks back to risk-based capital rules. This made any changes to the Basel III Endgame far more impactful.
Second, Federal Reserve Vice Chair for Supervision Michelle Bowman provided a clear blueprint in early 2026. In a series of speeches, she detailed how the previous, much tougher 2023 Basel proposal had pushed banks out of the mortgage market. She specifically pointed to areas ripe for revision, such as the treatment of mortgage servicing assets and risk-weighting for different types of loans. This signaled that the upcoming changes wouldn't be a blanket capital cut but a targeted effort to revitalize housing finance.
Finally, this regulatory recalibration has been happening against a backdrop of sustained political and industry pressure. Since early 2024, Fed Chair Jerome Powell and other officials have acknowledged the harshness of the 2023 draft, promising significant revisions. This long-running dialogue created the political space for regulators to develop a more balanced, 'capital-neutral' approach—one that strengthens the system without unnecessarily hindering economic activity.
- Basel III Endgame: The final set of international banking regulations developed after the 2008 financial crisis, focusing on how banks measure risk and how much capital they must hold against it.
- Supplementary Leverage Ratio (SLR): A rule requiring large banks to hold a minimum amount of capital against all their assets, without factoring in risk levels. It acts as a backstop to risk-based capital rules.
- Capital-neutral: A regulatory change designed so that, on average, the total amount of capital banks are required to hold does not increase or decrease.