Fed spearheads effort to ease 'Basel III endgame' capital requirements, Bloomberg News reports

(Reuters) -The Federal Reserve has begun developing a new risk-based capital rule aimed at easing the burden on the largest U.S. banks than a Biden-era plan, Bloomberg News reported on Friday, citing people familiar with the matter.

Regulators are largely scrapping the original 1,087-page proposal from two years ago and plan to unveil a new one as early as the first quarter of 2026, the report added.

Vice Chair for Supervision Michelle Bowman is leading efforts to develop the new rule, that would aim to simplify how banks calculate their capital requirements, according to the report.

Representatives of the Federal Reserve declined to comment, when contacted by Reuters.

The "Basel III" standard was agreed after the 2007-09 global financial crisis. It includes numerous capital, leverage and liquidity requirements. Regulators across the world have worked for years to implement many of those standards, and the so-called "endgame," agreed in 2017, is the final iteration.

These capital requirements serve as a financial cushion to enhance the resilience of these big banks against economic stress and safeguard the broader financial system.

The banking industry lobbied for a significantly weaker version of the "Basel Endgame" capital rule under the Trump administration, which was viewed as more favorable compared to the Biden-era approach.

The proposed rules, which would apply to banks with more than $100 billion in assets, would overhaul how the largest banks manage their capital, with potential ripple effects on their lending and trading activities.

The rules aim to prevent another financial crisis by requiring the largest U.S. banks, including JPMorgan Chase, Bank of America, and Goldman Sachs, to collectively set aside nearly $1 trillion to absorb potential losses from loans and trading activities.

However, banks say additional capital is unnecessary and will hurt the economy, and have aggressively lobbied against the project.

(Reporting by Pritam Biswas in Bengaluru; Editing by Shailesh Kuber)