U.S. Set to Loosen Bank Capital Rules Amid Growing Regulatory Debate

The U.S. government is reportedly preparing to loosen capital reserve requirements for major banks, a move that could reshape how financial institutions manage risk — and reignite debate over regulatory safeguards.

According to insiders cited by the Financial Times, the administration is expected to revise the supplementary leverage ratio (SLR), a key element of the Basel III framework designed to limit excessive risk-taking following the 2008 financial crisis.

The current SLR rules, introduced in 2014, require systemically important banks in the U.S. to maintain leverage ratios significantly above the international Basel III minimum of 3%, with thresholds reaching 5% or more at the holding company level. The potential adjustment would bring U.S. standards closer to those used in other advanced economies, where ratios typically range from 3% to 4.25%.

Supporters of the rollback argue that current requirements unfairly penalize banks for holding low-risk assets like U.S. Treasuries, limiting their ability to step in during times of market stress. Greg Baer, head of the Bank Policy Institute, says the time to act is now — before the next crisis forces reactive changes.

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Federal Reserve Chair Jerome Powell has also voiced support for a revision, suggesting earlier this year that a more flexible SLR could help stabilize the Treasury market.

But critics caution that loosening capital rules could leave the financial system vulnerable. Nicolas Véron of the Peterson Institute for International Economics warns that, given current economic uncertainties and the pivotal role U.S. banks play globally, dialing back protections could prove premature.

The exact details of the policy change remain unclear, but the anticipated move is already triggering a familiar clash: one between those advocating for market flexibility and those focused on systemic resilience.

Alexander Stefanov