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Bank Capital Regulatory Update

July 1, 2025

Banking regulators are starting to move ahead with reframing U.S. bank capital standards. 

We're looking at basically two big pieces now: Basel III and the leverage ratio. I'm pretty confident we'll move on both of those in the relatively near future.

Enhanced Supplementary Leverage Ratio

• On June 25 and June 26, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC), respectively, voted in open sessions to issue for comment proposed amendments to the enhanced Supplementary Leverage Ratio (eSLR) applicable:
  • The proposal calls for replacing the current eSLR, which requires globally systemically important banks (GSIBs) to hold additional capital equal to 2% of their total exposures, with a new capital charge, equal to one-half of each bank's GSIB surcharge.
  • Comments are due August 26.
• The joint banking agencies, including the Office of the Comptroller of the Currency (OCC), on June 27 officially requested comment on the proposal. One of the proposal’s key goals is to reduce disincentives for banks to engage in lower-risk activities, thereby encouraging the smoother functioning of U.S. Treasury markets.
• Two Federal Reserve Board members, Adriana Kugler and Former Fed Vice Chair of Supervision Michael Barr, voted against issuing the proposal, sharing their concerns about the potential impact on bank capital. According to Barr:

Enhancing the resilience of the U.S. Treasury market is an important objective that I share with my colleagues, but this proposal unnecessarily and significantly reduces bank-level capital by $210 billion for global systemically important banking organizations and weakens the eSLR as a backstop. I am skeptical that it will achieve the stated objective of improving the resiliency of the Treasury market.

Basel III Capital Requirements

Senior financial regulators, including Powell and Fed Vice-Chair of Supervision Michelle Bowman, have been sharing that developing a more capital-neutral framework for banks is a high priority. It appears likely that a new proposal would not use the proposal set forth under the Biden administration as a starting point.

In Congressional testimony last week, as reported in American Banker, Powell said that the Biden administration’s Basel III endgame proposal set minimum capital requirements "well above" the international standard. "I would agree we're going to take a fresh start at that.”

On July 22, the Federal Reserve will convene a conference on bank capital requirements, bringing together “a range of perspectives, including academics, practitioners, and market participants to discuss the key pillars of the regulatory capital framework.”

CREFC will closely monitor discussions and developments related to bank capital requirements, particularly as they relate to the CRE finance markets. We will provide feedback on forthcoming proposals via comment letters and meetings with bank agency leadership.

Please contact Sairah Burki (sburki@crefc.org) with any questions.

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