Trump administration prepares to slash bank capital rules in major deregulation push

Trump administration prepares to slash bank capital rules in major deregulation push

US financial regulators are preparing to announce the largest cut in bank capital requirements since the 2008 financial crisis, signalling a new phase in President Donald Trump’s sweeping deregulatory agenda. According to people familiar with the matter, agencies led by the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) are expected to reduce the supplementary leverage ratio (SLR)—a rule requiring large banks to hold a certain level of high-quality capital against total assets, the Financial Times reported.

A win for bank lobbyists

Bank lobby groups, including the Bank Policy Institute, have long argued that the SLR unfairly penalises banks for holding ultra-safe assets like US Treasuries. “Penalising banks for holding low-risk assets like Treasuries undermines their ability to support market liquidity during times of stress,” said Greg Baer, the group’s CEO. The move could unlock up to $2 trillion in lending capacity by exempting Treasuries and central bank deposits from the SLR calculation, according to analysts at Autonomous.

Critics call the timing risky

However, critics are sounding the alarm. Nicolas Véron of the Peterson Institute for International Economics warned that loosening capital rules in a volatile economic climate could increase systemic risk. “It doesn’t sound like the right time to relax capital standards at all,” he said, pointing to concerns about global instability and the dollar’s dominance.

Deregulation in service of Trump’s borrowing goals

Analysts suggest the reform may also align with Trump’s aim to reduce government borrowing costs. By freeing banks to buy more Treasuries, the policy could spur demand in the $29 trillion debt market, helping to keep yields low. Treasury Secretary Scott Bessent has called the reform a “high priority,” while Fed Chair Jay Powell has hinted that easing SLR could be part of broader efforts to restructure the Treasury market.

Push for global alignment

US banks currently face more stringent SLR rules than their European or Asian counterparts. The biggest eight US banks must maintain Tier 1 capital equal to 5% of total leverage, versus 3.5% to 4.25% in most other major economies. Bank lobbyists hope new rules will narrow that gap, making US banks more competitive globally.

Limited gains for some banks

Despite the move, analysts caution that only a few banks like State Street are meaningfully constrained by the current SLR. Most major banks are already bound by other requirements, including risk-adjusted capital ratios and annual Fed stress tests.

While regulators have yet to officially confirm the timeline, lobbyists expect formal proposals by summer. If implemented, the reform would mark one of the Trump administration’s most consequential rollbacks of post-2008 financial safeguards.