US banks could face 20% capital hike under new global rules

By Pete Schroeder

WASHINGTON (Reuters) - U.S. banks could face capital hikes of as much as 20% under new rules being prepared by U.S. regulators as part of a global effort to harmonize capital requirements, a person familiar with the matter said on Monday.

U.S. regulators, led by the Federal Reserve, are expected to unveil the proposed tougher requirements by the end of this month, according to this source, who spoke on condition of anonymity.

The proposal is expected to implement a final batch of global bank capital rules laid out by the Basel Committee of banking regulators that are due to take effect at the beginning of 2025.

The Wall Street Journal first reported the forthcoming proposal.

Michael Barr, the Fed's top regulatory official, told Congress last month that the central bank would likely unveil its plan to ratchet up capital rules for banks this summer and ensure supervisors more aggressively police lenders following the bank failures. Barr, the Fed vice chair for supervision, added that the central bank was "carefully considering" rule changes for larger regional banks.

Randal Quarles, who led Fed regulations before Barr, cautioned in a 2021 speech that fully implementing the remaining Basel requirements could result in capital requirements increases of as much as 20% for the largest banks.

The Wall Street Journal reported that the precise amount of capital requirements will depend on a bank's business, with U.S. megabanks with big trading businesses expected to face the largest increases.

Banks such as Morgan Stanley and credit card giant American Express that are heavily dependent on fee income, such as from investment banking or wealth management, could also face large capital increases, the Journal reported.

Morgan Stanley and American Express did not immediately respond to requests for comment by Reuters.

(Reporting by Baranjot Kaur in Bengaluru; Editing by Savio D'Souza and Will Dunham)