Bank Capital Conference Hints at Significant Reform
July 29, 2025
On July 22, the Federal Reserve hosted a highly anticipated conference on the state of and potential reforms to the bank regulatory capital framework. Fed Chair Jerome Powell and Vice-Chair of Supervision Michelle Bowman were both in attendance.
Panels on the following topics featured bankers, regulators, and academics:
- Leverage ratio reform
- Evolution of the capital framework
- Reforms to the Global Systemically Important Bank surcharge (G-SIB) framework
- Evaluating the stress test regime
- Chief Financial Officers' perspectives on reforms to the capital framework
Basel III: The Central Theme at the Conference
- Most participants favored moving forward with Basel “Endgame” implementation, but with tailoring to account for bank size and business model.
- Many panelists voiced concerns about the risk of double-counting capital requirements given overlaps between stress testing frameworks and Basel III.
Other key themes included the need to:
- View the capital framework holistically rather than as a loose compilation of different rules. Speakers consistently argued that changes in one part of the framework (e.g., leverage ratios, G-SIB surcharge, stress tests) can have unintended consequences or create redundancies elsewhere, leading to suboptimal outcomes.
- Approach regulation pragmatically, focusing on identifying problems and developing efficient, simple solutions. Many speakers advocated for reducing bureaucracy, streamlining processes, and ensuring clearer, more predictable rules to enhance banks' abilities to serve customers and support economic growth.
- Ensure greater transparency in regulatory models, scenarios, and data to help identify and correct flaws, build trust with the public and investors, and enable banks to better manage risk and capital needs.
- Prevent regulations, particularly the enhanced supplementary leverage ratio (eSLR) and GSIB surcharge, from disincentivizing bank engagement in low-risk activities (like Treasury market intermediation) or pushing credit origination outside the regulated banking system.
Yes, but: As reported by
Law360, the conference has “drawn criticism in recent weeks from some Democrats and financial regulation advocates, who said the lineup of panelists tilted heavily toward industry-friendly voices.”
- What they're saying: In a letter to Bowman last week, Sen. Elizabeth Warren (D-MA) said that the event was being used to justify "dangerous" regulatory rollbacks and that the panels favored Wall Street representatives at the expense of consumers, small businesses, and other "Main Street stakeholders."
- What’s next: Based on the conference’s theme of a holistic capital review and previous remarks made by senior regulators, we would expect significant changes to the bank capital framework.
- However, it is unclear whether we will see separate proposals (e.g. G-SIB surcharge, stress testing, Basel Endgame) or one comprehensive proposal.
In a speech the night before the conference, U.S. Treasury Secretary Scott Bessent thanked Bowman for convening the conference and urged a “fundamental reset of financial regulation.”
Most significantly, his comments reinforced the heightened role of the administration, as stated in President Donald Trump’s February
Executive Order on agency accountability, in promulgating future regulations: