Financial regulators have proposed relaxing rules on bank investments, a move that could benefit big banks and those who favor easing regulations. The proposal, supported by the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, aims to reduce the requirement for banks to hold against their assets.
Under the new rule, banks would only need to pay half of a standardized surcharge tied to their size, rather than holding an additional 2% in capital. This could encourage banks to invest more in U.S. treasuries, potentially lowering interest rates.
However, opponents argue that this change could weaken a backstop for risky investments and increase the risk of bank failures. Some regulators, including Fed governor Adriana Kugler, have expressed concerns about the proposal, citing increased systemic risk.
The plan has been supported by Treasury Secretary Scott Bessent, who believes it will encourage banks to invest more in U.S. treasuries and reduce interest rates. The Federal Reserve’s top bank regulator, Michelle Bowman, also supports the proposal, stating that the current requirement is a “binding constraint” that deters banks from pursuing safe investments.
The proposal is significant, as it marks the most substantial rule change since Trump took office. Senate Minority Leader Chuck Schumer has expressed concern about the White House’s decision to limit classified intel with Congress, while Democrats are watching Zohran Mamdani’s victory in the New York City mayoral primary with interest, worried that it could impact their own reelections.
Source: https://www.axios.com/2025/06/25/fed-bank-wall-street-regulation