, Columnist
Lending Risk Is Growing Under the Radar
New capital rules are missing where the fastest loan growth has been.
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When Congress voted in 2018 to give regional banks a break from stiffer post-crisis capital rules, it created a two-tier banking system in the US. One aim of the Federal Reserve’s reforms launched this summer was to undo that and ensure that all banks with more than $100 billion in assets meet the same standards as the biggest lenders.
But the US will still have a two-tier regime if these proposals pass – which is no slam dunk given the heated opposition. This matters because the banks that will remain lightly regulated have become increasingly important lenders. Failures among those with less than $100 billion in assets should be less damaging — but they might not be.