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A top Federal Reserve official announced changes to proposed U.S. banking regulations that would reduce the additional capital large institutions must hold by approximately 50%. The regulatory overhaul, known as the Basel Endgame, originally aimed to increase capital requirements for the world’s largest banks by about 19%, but will now see a more modest 9% increase under the revised proposal.

The decision to make these changes came after receiving feedback from banks, business groups, lawmakers, and other stakeholders regarding the potential impact of the original proposal. The revised regulations seek to strike a better balance between increasing capital requirements for safety and tightening oversight of risky activities while avoiding making loans more costly or harder to obtain.

The adjustments made to the Basel Endgame regulations also benefit regional banks with assets between $100 billion and $250 billion by excluding them from certain provisions. Additionally, the proposal addresses issues such as risk weighting for tax credit equity funding structures, surcharges for firms with operational failures, and the recognition of lower-risk investment management operations.

Despite the revisions, the new proposal still faces scrutiny and potential litigation from the banking industry. Senator Elizabeth Warren criticized the revised bank capital standards, calling them a “Wall Street giveaway” that increases the risk of a future financial crisis and exposes taxpayers to bailouts.

The American Bankers Association welcomed the announcement of the revised proposal but emphasized the need for a thorough review to ensure that any increase in capital requirements is appropriately tailored and considers the impact on the economy.

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