Capital Crunch

Capital Crunch

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  • US regulators plan to require large banks to bolster their financial strength to improve the system's resilience after recent midsize bank failures. The proposed changes, expected this month, could raise capital requirements by around 20% on average for larger banks, with the highest increases anticipated for US megabanks with significant trading operations.
  • Banks dependent on fee income may face significant capital increases to absorb potential losses. The plan to strengthen capital requirements marks a shift towards stricter regulations for Wall Street, which some argue could lead to more bank mergers and potentially restrict access to loans for Americans.

Why it matters

Tougher regulations were already planned for major banks, and following recent failures, regulators intend to apply these rules to a wider range of banks, potentially including those with at least $100 billion in assets. Critics warn that a substantial increase in capital requirements could lead to higher costs for consumers and banks discontinuing certain services.


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