For release on July 27, 2023
Banking regulators today sought comment on a proposal to boost the strength and resilience of the banking system. The proposal will change capital requirements for large banks to better reflect underlying risks and increase consistency in how banks measure their risks.
The changes would implement the final components of the Basel III accord, also known as the Basel III endgame. Moreover, following the banking crisis of March 2023, the proposal aims to further strengthen the banking system by imposing a broader set of capital requirements on several major banks. The proposal would generally apply to banks with total assets of $100 billion or more. Community banks will not be affected by this proposal.
In particular, the proposal will standardize aspects of the capital framework related to credit risk, market risk, operational risk and financial derivatives risk. In addition, the proposal will require banks to include unrealized gains and losses on certain securities in their capital ratios. These banks will also be subject to the additional leverage ratio and the countercyclical capital buffer, if activated.
The proposed improvements to strengthen the banking system are estimated to result in an overall increase of 16 percent in Tier 1 capital requirements for affected bank holding companies, with the increase mainly affecting the largest and most complex banks. The effects will vary per bank, depending on its activities and risk profile. Most banks will currently have sufficient capital to meet the proposed requirements.
The proposal includes transitional provisions to give banks sufficient time to adapt to the changes while minimizing any negative impact. During the comment period, the agencies will collect data to further refine their estimates of the proposal's impact. Under the proposal, major banks would begin transitioning to the new framework on July 1, 2025, with full compliance from July 1, 2028.
In addition, the Federal Reserve Board also today requested comment on a proposal that would make certain adjustments to the capital allowance calculation for the largest and most complex banks. The changes would better tailor provisioning to each bank's systemic risk profile, in particular by measuring a bank's systemic importance on average over the entire year rather than just at the end of the year.
Comments on both proposals are due by November 30, 2023, which is more than 120 days for public comment.
FDIC: PR-55-2023
