Regulators on Tuesday watered down an effort to layer new oversight on banks to protect against losses, which led to a fierce outcry from big banks and their lobbyists.
The new standards, known as “Basel III endgame,” had been debated for years. They would have raised the amount of capital banks were required to maintain, funds intended to ensure stability and provide a financial cushion. Banks argued that the stricter rules would force them to crimp lending.
The newly proposed rules will largely erase extra requirements on banks with between $100 billion and $250 billion in assets. It also slashes in half the capital reserve requirements on the largest, so-called systematically important lenders.
Michael S. Barr, the Federal Reserve vice chair who is no favorite of the bank lobby, acknowledged the blowback in a speech laying out the changes: “Capital has costs, too,” he said in a speech at the Brookings Institution in Washington. In its statements pushing against the rules over the years, the banks’ main lobbying organization has said that “capital isn’t free.”
“Life gives you ample opportunity to learn and relearn the lesson of humility,” Mr. Barr said.
This is a developing story. Check back for updates.