The Federal Reserve has unveiled plans to reduce capital rules imposed since the 2008 financial crisis, in response to growing concerns about economic uncertainty. The move is aimed at making it easier for banks to operate and restore lending, which has slowed in recent months.
However, the Fed’s decision also raises concerns among regulators who fear that easing capital requirements could increase risk-taking by banks and undermine stability in the financial system.
The Federal Reserve Board of Governors said that it will introduce new rules that allow banks to hold less capital against their most stable assets. This change aims to simplify regulatory requirements for smaller lenders, making it easier for them to access credit.
In addition, the Fed is also considering changes to its leverage ratio, which measures a bank’s capital holdings relative to its total risk-weighted assets. The goal is to make it easier for banks to manage their lending and investment activities without excessive restrictions.
While details of the planned rules are still under review, experts say that easing capital requirements could have both positive and negative effects on the economy. Some argue that it could help stimulate economic growth by making credit more accessible, while others warn that it could lead to reckless behavior among lenders.
Source: https://www.ft.com/content/4c347075-242b-42c4-b27e-81c287d13a8d