In a speech at the Cato Institute, Federal Reserve Board Vice Chair for Supervision Michelle W. Bowman outlined a forthcoming package of US bank capital proposals intended to streamline overlapping requirements and recalibrate capital to better match underlying risk. She indicated the Federal Reserve is working with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation on joint rulemakings spanning the four “pillars” for the largest banks: stress testing, the supplementary leverage ratio, Basel III risk-based capital requirements, and the global systemically important bank (G-SIB) surcharge, alongside updates affecting smaller and less complex banks. Bowman said the Basel III proposal would move the largest banks to a single risk-based capital calculation, eliminating the current parallel standardized and internal model-based advanced approaches. She described credit-risk changes that recognise loan-to-value ratios for mortgages and repayment history in retail lending, without adding new capital penalties for mortgages or consumer lending and with a request for feedback on private mortgage insurance, as well as more risk-aligned treatment of business credit quality. The framework would introduce tailored standardized operational-risk requirements, revise market-risk capital for trading activities with a standardized calculation and expanded internal-model use where data are robust, and add a credit valuation adjustment (CVA) capital requirement for banks with significant trading activity and material derivatives portfolios, focused on bilateral transactions among large financial firms. For non-G-SIB banks, a new standardized approach would moderately reduce and better align risk-based requirements across key lending categories, assign a 250 percent risk weight to mortgage servicing assets instead of requiring deduction from capital (with feedback sought on the appropriate risk weight), and require large banks to include elements of accumulated other comprehensive income in common equity tier 1 capital with a five-year phase-in and consultation on scope. On the G-SIB surcharge, she said the proposal would update coefficients, realign the methodology with the international approach, index the surcharge to economic growth, rebalance the short-term wholesale funding component, shift certain indicators to daily or monthly averages, move to 10 basis point surcharge increments, and improve measurement of systemic indicators. She also framed these changes alongside previously proposed revisions to the enhanced supplementary leverage ratio and stress testing, and stated the Basel III proposal is expected to produce a small increase in requirements for the largest banks while the G-SIB surcharge proposal would modestly reduce surcharges, yielding a small net reduction overall. Bowman said the proposals would be published in the coming week and would be subject to public comment.
Federal Reserve Board 2026-03-12
Federal Reserve Board signals imminent proposals to implement the final phase of Basel III and overhaul the G-SIB surcharge
Federal Reserve Board Vice Chair for Supervision Michelle W. Bowman announced US bank capital proposals to streamline requirements and align capital with risk. Developed with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, the proposals focus on stress testing, leverage ratios, Basel III requirements, and the G-SIB surcharge. Key changes include a single risk-based capital calculation for large banks, revised credit-risk and operational-risk requirements, and updates to the G-SIB surcharge methodology.