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Bank Regulation · Capital Requirements · Deregulation · Financial Industry
US regulators are reportedly preparing to make substantial cuts to banks’ capital requirements, specifically reducing the supplementary leverage ratio, marking the largest deregulation effort in over a decade and benefiting the banking industry.
The Financial Times reported on May 15, 2025, that these cuts are part of a series of deregulation efforts by the Trump administration. The supplementary leverage ratio, established in 2014 after the 2008-2009 financial crisis, requires big banks to hold high-quality capital against assets.
The banking industry, represented by the Bank Policy Institute's CEO Greg Baer, has long lobbied against this rule, arguing it hinders credit extension, penalizes holding low-risk assets like U.S. Treasuries, and curbs participation in the government debt market. Critics, including Nicolas Véron of the Peterson Institute for International Economics, warn against relaxing capital standards given current market volatility and policy upheaval.
This move follows other deregulation actions, such as the Consumer Financial Protection Bureau (CFPB) rescinding 67 policy documents and reportedly planning to vacate Rule 1033, which underpins open banking. Former Obama administration Treasury official Amias Gerety cautioned that dropping enforcement without rewriting regulations creates a chaotic landscape, leading larger banks to adopt a cautious approach.
