The Federal Reserve proposed on Wednesday loosening rules for 16 financial institutions, an important move forward in the Trump administration’s effort to roll back bank regulation.
The Fed’s proposals would affect banks with $100 billion to $700 billion in assets, including U.S. Bancorp, Capital One, and American Express. The changes would not apply to the nation’s eight largest banks, like Bank of America and Goldman Sachs, which have significantly more loans and securities on their balance sheets.
Perhaps the most significant change concerned a rule aimed at making sure banks have enough cash in times of crisis. The rule, known as the liquidity coverage ratio, requires banks to stockpile so-called liquid assets (like Treasury securities) that can be sold quickly to raise cash during a crunch period. The Fed’s proposal would allow 11 banks, including large regional lenders like SunTrust and BB&T, to stop complying with the ratio altogether, and it relaxes the ratio for four other firms. The Fed would still require the banks that get to drop the ratio to comply with other liquid standards. But Ms. Brainard said in a statement that the expected reduction in liquid assets would make it more likely that the affected banks would come under greater stress during challenging financial conditions.
Another big change proposed Wednesday concerned the tests the Fed performs on banks once a year to assess whether they have the financial strength to make it through a financial and economic shock. Bank executives have long complained of the high cost of complying with the tests, but regulators have contended the tests help them and bank executives better understand the risks in their businesses. Under the proposals, 11 banks will be subject to tests once every two years.
Read more in The New York Times.