US regulator keep risk low on high capital

U.S. regulators plan to significantly reduce the additional capital banks are required to keep due to a proposed rule called “Basel III.”

The proposal would change how banks with assets over $100 billion determine how much cash they need to set aside for possible losses.

The plan is expected to drop dramatically when regulators begin a comprehensive revision of the document.

The most expensive component of the proposal would require banks to recalculate possible losses from operational risks, resulting in the largest capital savings.

Banks have been pressuring regulators to lower the risk weights for fee income related to lending services, such as investment banking.

Officials also want to eliminate or lower greater risk weights on mortgages for low-income borrowers and on tax incentives for green energy.

The proposed rule has drawn opposition from politicians, including several well-known Democrats. Banks have lobbied Congress, launched grassroots and advertising efforts, and hinted that they would file a lawsuit.


Posted