Before the plan’s unveiling, banks and Republican members of Congress expressed similar worries, indicating a long and difficult road to enacting the huge change.
Regulators will accept comments through November 30 and apply the new guidelines by mid-2028.
The proposed rule would implement a 2017 Basel Committee on Banking Supervision agreement to change how banks assess risk and how much reserves they must retain to cover losses.
The proposal alters bank lending, trading, and internal risk gauges.
The plan would replace bank internal models for risk measurement with a standardized approach, which regulators say will provide more reliable and comparable outcomes and increase capital.
After numerous midsized corporations failed in the spring, the idea reverses relief for banks over $100 billion.
Under the plan, banks that size would have to account for unrealized gains and losses on available-for-sale securities and meet higher leverage requirements.
That move would be felt primarily by banks with $100 billion to $250 billion in assets, such as Citizens Financial Group (CFG.N), Fifth Third (FITB.O), Huntington (HBAN.O), and Regions (RF.N), which enjoyed numerous looser standards under 2019 reforms.
In afternoon trade, the S&P bank stock index (.SPXBK) fell 0.9%, reversing earlier gains.
The Securities Industry and Financial Markets Association argued an operational risk capital levy would penalize fee-based wealth management and investment banking.
“Imposing a punitive capital charge on businesses that provide steady fee income is misguided,” SIFMA president and CEO Kenneth E. Bentsen, Jr. stated.
JPMorgan Chase (JPM.N), Bank of America (BAC.N), and Morgan Stanley (MS.N) executives have cautioned that tougher regulations could compel them to cut services or raise costs. Analysts say it might take years of retained earnings to comply, limiting dividends and share buybacks.
Most banks have enough capital to satisfy the proposal, and those that need to catch up would need two years of retained earnings, agency officials said Thursday.
The Fed also announced technical changes to its levy on major global banks.
Fed staff said the modifications, which make surcharge calculations more specific, would require $13 billion extra capital from the eight largest banks.