(Bloomberg Advice) – The Federal Reserve aims to reduce the expensive fluctuations in bank capital requirements created by its annual stress tests. But big money shooters insist on more relief while the central bank is politically weakened and some management members are eager to please the White House. The Fed should be careful not to give away too much by piece by tackling different regulatory changes in a broken way. A community of leaders and industry regulators next month to discuss an integrated overview of the major banks’ capital requirements, announced by the Fed on Thursday, is the place to start. Financial safety is now vulnerable. President Donald Trump benefits the regulation of the looser in the hope of promoting growth and who sees Republicans as a political focus on climate risks and diversity efforts. At the same time, Trump is trying to undermine the Fed independence by chairman Jerome Powell to lower interest rates. Important management members recently supported early cuts. Powell himself also had to eat humble pie on the observed overreaction by the bank’s supervisors to influence the lending decisions in the industry by the Prism of Reputation risk – he has now ordered it to be removed from the bank assessments. The central bank also stumbled badly in its attempt to update US capital rules and align it with the International Basel standards, which led to a humiliating climb by US regulators last year. This year’s stress test results are too much today and the Fed can also update markets on the plans for the first change to the outcomes of the outcomes on banks. Since 2020, the results of this test have been used to calculate between a quarter and a half of the major banks’ minimum capital requirements, but because the tests differ each year, the amounts involved have varied greatly. JPMorgan Chase & Co., Goldman Sachs Group Inc. And the rest saw that their billions of dollars vary. Rulemakers at the Fed, sympathetic to complaints about the costs and uncertainty, intend to start using an average of two years’ results to limit the variation. Normally, banks must meet their new requirement three months after setting up: by October after the results are released every June. The industry wants a phase-in period until the end of the year. This sensible smoothness can help banks’ planning without undermining the safety of the system. Lobby groups such as the Financial Services Forum, which represent the eight largest lenders, and the Bank Policy Institute want more. First, they asked banks to be allowed to take full advantage of any cuts in requirements while using on average to limit any increase. The argument is that the cost of adding capital is asymmetrical, which is why there is also a justification to make the average asymmetrical. It is clear that it is self -serving. It will tend to benefit from less capital over time. It is also only one side of the argument: there is asymmetry to release fairness that the Fed must worry about, which poses an extra risk to the stability of the system. The less capital needed, the greater the chance that some bank is unable to cover and fail all its losses. Average should apply both ways if used at all. The cost of extra claims is also somewhat academic, because all the largest banks have a significant excessive equity on the requirements, and this year’s test was less darling than last year, and it is also expected to mean a cut for most banks. The industry also has more substantial changes in its wish list in longer term. First, more transparency is in the way in which the stress tests in the Fed’s calculations of capital needs feed. The process has become more opaque and less predictable over the past year, which hurts the banks. But the argument against too much transparency is that borrowers can play the result. However, worse if it is that banks want to use it to challenge the Fed’s decisions. ‘This would enable firms to reconsider meaningfully [capital] Required, ‘the FSF wrote in a letter to policymakers on Monday. It would be a mess. There are problems with opacity, but regulators must have some power and discretion. Their work is to serve taxpayers and the financial system, not to be tied up in an expensive appeal and arguments. ‘ Another industry is the double score of the Widate ferry. is a fair complaint and was a major problem with the Fed’s proposal launched in 2023 to name the US rules in the US. Work and ensure a result that sets steady and safe capital levels in an effective and understandable way for all parties. In ways that endanger their survival. Managers who can cause the death of financial safety. On Bloomberg.com/opinion © 2025 Bloomberg LP
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