Easing Capital Rules
- Stephen H Akin
- Jul 22
- 4 min read
Updated: Oct 19
From the Securities Exchange Commission review of the "Pattern Day Trader Rule" and the easing of the $25,000 margin requirement to the "Big Banks" supplementary leverage ratio, requirements are shifting. These changes aim to balance increased financial stability with the potential impact on bank profitability and market participation.
Integrated Review of the Capital Framework for Large Banks Conference
The Federal Reserve is hosting a conference to provide expert perspectives on the key pillars of the regulatory capital framework – including Basel III Endgame, stress testing, the capital surcharge for the largest banks, and leverage requirements.
The conference explores those interactions, consider approaches for implementation, and the implications they may have for the efficiency and overall functioning of the financial system. The Federal Reserve welcomes the opportunity to consider a broader range of perspectives when considering the future of capital framework reforms.
Vice Chair for Supervision Michelle W. Bowman. "I look forward to hearing from a broad range of perspectives as we look to the future of capital framework reforms."
The conference features panel discussions on several capital requirements, including the Basel III endgame rules; the stress testing framework; the capital surcharge for the largest banks; and leverage requirements. The Integrated Review of the Capital Framework for Large Banks conference will take place at the Federal Reserve Board building in Washington, D.C., and will be livestreamed for the public.
Notice of Proposed Rule making on Modifications to the Enhanced Supplementary Leverage Ratio (eSLR) Standards Laws and Regulations
Summary:
The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System (Federal Reserve), and Federal Deposit Insurance Corporation (together, the agencies) are inviting public comment on a notice of proposed rulemaking (proposal) to modify the enhanced supplementary leverage ratio (eSLR) standards applicable to U.S. bank holding companies identified as global systemically important bank holding companies (GSIBs) and their depository institution subsidiaries. In addition, the Federal Reserve is proposing to amend its total loss-absorbing capacity and long-term debt (LTD) requirements applicable to GSIBs to align with the proposed eSLR standards for GSIBs.
Statement of Applicability: The contents of, and materials referenced in, this FIL apply to depository institution subsidiaries of U.S. global systemically important bank holding companies.
Highlights:
The proposal would recalibrate the eSLR standards to help ensure the SLR generally serves as a backstop to risk-based capital requirements and to address disincentives banking organizations subject to eSLR standards may have to engage in low-risk, low-return activities, including U.S. Treasury market intermediation.
Under the proposal, a GSIB’s eSLR must be equal to or greater than the 3 percent SLR plus 50 percent of its Method 1 GSIB surcharge to avoid limitations on its capital distributions and certain discretionary bonus payments, rather than the current 5 percent eSLR standard.
The depository institution subsidiary of a GSIB would be subject to the same eSLR standard as its parent:
To avoid limitations on capital distributions and certain discretionary bonus payments, such depository institutions would need to meet an eSLR standard equal to the 3 percent SLR plus 50 percent of the parent’s Method 1 GSIB surcharge, rather than the current 6 percent eSLR standard.
The Federal Reserve’s proposal would also make conforming modifications to the TLAC leverage buffer and the external LTD requirement. The 2 percent TLAC leverage-based buffer and the external leverage-based LTD requirement would be revised to reflect the proposed change to the eSLR standards for GSIBs.
Comments are due by August 26, 2025.
Day-Trading Restraints to Be Loosened Under Proposed Rule Change
US regulators are finalising plans to replace a controversial rule that would dramatically lower a threshold for retail investors to trade equities and options more often.
The Financial Industry Regulatory Authority (Finra) is looking to rework the “pattern day trading” (PDT) rule that limits investors with less than US$25,000 (RM105,087) in their margin account from borrowing to trade four or more times in a five-day period. In a proposal being prepared for Finra’s board to eventually vote on, retail investors would need to have only US$2,000 in their accounts for such trades.
Currently, when an investor with less than US$25,000 exceeds the US$2,000 margin in borrowing from a brokerage to make equity and options trades, Finra classifies the investor as a pattern day trader, meaning they’re prohibited from making excess trades on margin. If the draft proposal goes forward, the three-trade maximum would be eliminated and individual brokerages would make their own margin calculation and decisions as to the minimum balance that customers need to day trade.
Bessent calls on Fed to do comprehensive review of its mission
Treasury Secretary Scott Bessent on Monday called on the Federal Reserve to do an institution-wide review of whether it is achieving its mission, as the administration steps up pressure on Chair Jerome Powell.
“What we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent said on CNBC. “If this were the [Federal Aviation Administration] and we were having this many mistakes, we would go back and look at why has this happened.”
In a post on X later on Monday, he clarified that he was calling on the central bank to conduct such a review.
“While I have no knowledge or opinion on the legal basis for the massive building renovations being undertaken on Constitution Avenue, a review of the decision to undertake such a project by an institution reporting operating losses of more than $100 billion per year should be conducted,” he said in the post. “The Fed does regular reviews of its monetary policy framework. I would urge Fed leadership to similarly undertake, publish and implement a comprehensive institutional review across its entire mission to buttress its credibility.”
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