Wall Street banks plan final push to ease capital charges before November vote

Wall Street’s largest banks are quietly making one more run at U.S. regulators to soften two pieces of the post-crisis capital framework, hoping to bank further relief before the November midterm elections rearrange the politics in Washington.

The Bank Policy Institute and the Financial Services Forum, the two trade groups that lead the industry’s regulatory lobbying, are pressing the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation on a narrow set of asks, according to public filings and industry statements reviewed this week. They want the surcharge applied to globally systemic banks recalibrated for nominal economic growth. They also want a lighter capital charge against undrawn credit-card and corporate credit lines in the Basel III endgame package.

The agencies released a redrafted package on March 19. Their own staff modelled it as cutting aggregate Tier 1 capital at the eight largest U.S. firms by 4.8 per cent. The industry says it can do better.

The two asks

The first ask centres on the global systemically important bank, or G-SIB, surcharge. The current Method 1 formula, set in 2015, scales required capital to a bank’s size, complexity, interconnectedness and cross-jurisdictional activity, but pegs the inputs to fixed dollar coefficients that have not been adjusted for nominal economic growth. Banks argue the absence of an inflation or GDP indexation mechanism has caused the surcharge to drift higher purely because the financial system has grown, not because individual firms have become riskier.

In testimony before the House Financial Services Committee on April 28, Bank Policy Institute President and Chief Executive Officer Greg Baer said the proposals “reflect a new and cogent approach to capital regulation,” but argued that several inputs still need adjustment to account for “duplicative” capital requirements layered across the framework.

The second ask is more technical, and more contentious. Under the Basel endgame standardised approach, undrawn portions of credit lines, including corporate revolvers, charge cards and small-business commitments, attract a credit-conversion factor that translates into a capital charge. The Federal Register notice published on March 27 acknowledged that for charge cards with no pre-set credit limit, the agencies were proposing to use the highest historical drawn balance as a proxy for off-balance-sheet exposure. Banks counter that the methodology over-states the genuine risk of facilities that can be cancelled at the issuer’s discretion and that, in practice, are rarely fully drawn.

Kevin Fromer, President and Chief Executive Officer of the Financial Services Forum, which represents the eight largest U.S. financial institutions, told Bloomberg Television last summer that “there is no evidence we need more capital in these institutions now,” and that higher requirements “will have a significant impact on consumers and small businesses and corporate customers, farmers, everybody across the economy.”

Why the November deadline matters

Regulators and the industry are working to a finalisation timeline that lands before the U.S. midterm elections in November 2026. Both sides view that window as the cleanest opportunity to close out a rule-making cycle that has now stretched across two administrations.

Federal Reserve Vice Chair for Supervision Michelle Bowman, appointed by President Donald Trump and the architect of the rewrite, told a March audience the agencies wanted to “eliminate duplicative charges in the overall capital framework” and ensure “banking activities do not migrate out of the regulated system.” She has separately urged the industry to avoid the kind of aggressive public lobbying campaign that defined the last round of Basel negotiations.

Her predecessor, Michael Barr, in 2023 unveiled a draft that would have raised capital at the largest banks by as much as 20 per cent. That proposal triggered an industry response, including television advertising and joint trade-group letters to Congress, that contributed to the rule being shelved and eventually rewritten under the current administration.

Estimates of the relief already on the table

Even before the May lobbying push, the redrafted package is materially lighter than its predecessor. The enhanced supplementary leverage ratio reform finalised by the FDIC and Federal Reserve in November 2025, and effective from April 1, 2026, replaces the flat 2 per cent eSLR buffer for G-SIB holding companies with a buffer equal to half of each firm’s Method 1 G-SIB surcharge, capped at 1 per cent for subsidiary banks.

FDIC staff estimated that change alone would reduce aggregate Tier 1 capital requirements by $13bn, or just under 2 per cent, at G-SIB holding-company level, and by $219bn, or 28 per cent, at the major bank-subsidiary level. Combined with the March 19 Basel rewrite, lobbyists view the cumulative reduction as already meaningful. They want the credit-line and surcharge tweaks to push the relief into double-digit-billion territory at the parent level.

Industry posture and pushback

The Bank Policy Institute, the Financial Services Forum and the American Bankers Association responded to the March drafts as “an important step forward,” language consistent with a coordinated industry signal that further changes are still being sought.

Mayra Rodriguez Valladares of MRV Associates, a banking consultancy that has been critical of the rewrite, testified at the same April 28 House hearing that the cumulative effect of the proposals would weaken safeguards put in place after the 2008 financial crisis. Bowman, in her March 19 statement, countered that capital at the largest U.S. banks would remain “robust” under the new framework.

Comment letters on the March 19 package are due in the coming weeks, after which the agencies are expected to issue a final rule. JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley are all members of both the Bank Policy Institute and the Financial Services Forum, and are jointly represented in those filings.