The U.S. Federal Reserve on Wednesday released a proposal to loosen rules for large U.S. banks with less than 700 billion dollars in assets, the latest move to roll back some tougher financial regulations put in place after the 2008 financial crisis.
The proposal, approved by a 3-1 vote at the Fed's board meeting on Wednesday, would divide large banks with more than 100 billion dollars in assets into four categories based on their size and other risk factors.
Banks in the lowest risk category, a group with assets between 100 billion dollars and 250 billion dollars, would no longer be subject to standardized liquidity requirements, according to the Fed.
"Additionally, these firms would no longer be required to conduct company-run stress tests, and their supervisory stress tests would be moved to a two-year cycle, rather than annual," the Fed said in a statement.
Banks with assets between 250 billion dollars and 700 billion dollars would still be subject to annual Fed stress tests, but would only need to run internal stress tests on a two-year cycle, rather than semi-annually.
Banks in the highest risk categories, including the so-called global systemically important banking organizations, would not see any changes to their capital or liquidity requirements, according to the central bank.
"The proposals would prescribe materially less stringent requirements on firms with less risk, while maintaining the most stringent requirements for firms that pose the greatest risks to the financial system and our economy," Fed Chairman Jerome Powell said in a statement.
Fed governor Lael Brainard said she supports efforts to loosen rules for banks with less than 250 billion dollars in assets, but she objected to the proposed relief for banks above that threshold.
"For firms with between $250 and $700 billion in assets, the rulemakings under consideration propose to weaken not only liquidity requirements, but also a capital requirement," Brainard said in a statement.
"I see little benefit to the institutions or the system from the proposed reduction in core resilience that could justify the increased risk to financial stability and the taxpayer," she added.
