Middle ground

31 October 2018 By Gina Chon Follow @GinaChon

The Federal Reserve wants to modestly loosen liquidity rules for commercial banks like U.S. Bancorp and PNC. That will leave the United States’ biggest global lenders – the likes of JPMorgan and BofA – the only ones stuck with a largely undiluted post-crisis Dodd-Frank regime.

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The U.S. Federal Reserve’s board of governors on Oct. 31 is expected to pass rules that would provide regulatory relief for banks according to their total asset size. Banks with assets between $100 billion and $250 billion would no longer face standardized liquidity requirements and don’t have to conduct and publicize results of capital stress tests.

Firms with at least $250 billion in assets would see modest reductions in their regulatory burden, too. That will help companies like U.S. Bancorp and PNC Financial Services. Lenders that have at least $700 billion in assets would not see any changes in their capital requirements, a group that includes JPMorgan, Bank of America, Wells Fargo and Citigroup.

Tailoring the application of certain rules falls to the Federal Reserve. Banks that have at least $250 billion in assets and at least $75 billion of certain riskier exposures, such as short-term wholesale funding, would be subject to the tougher standards. Other rules that reduce requirements for capital, the liquidity coverage ratio and the net stable funding ratio are jointly led by the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.

The measures stem from legislation signed into law in May. The bill raised the asset threshold for banks considered to be systemically important from $50 billion to $250 billion.

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