US Banking Rule Reform Is Too Important to Rush

Banks’ businesses don’t change radically year to year so nor should their capital requirements. In the US, however, the Federal Reserve’s annual stress tests have been volatile, unpredictable and one of the main determinants of how much equity big banks need in the 12 months after the results come in. No other country uses this approach. Now as the Fed and other regulators prepare to tackle this and other banking rules under a biddable and deregulation-friendly White House, watchdogs need to ensure they don’t hastily give too much away.

Excitement about an easing of capital demands under President Donald Trump helped propel bank stocks to highs at the start of the year. But change has been slow to arrive, disappointing investors who had hoped for billions of dollars in rapid share buybacks. In truth, it was always going to take time to fill the roles that oversee reviews. Michelle Bowman has been nominated as vice-chair for supervision at the Fed and to lead its rulemaking efforts. Meanwhile, the acting heads at the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency are waiting to be confirmed in their roles after Treasury Secretary Scott Bessent made clear this month that there were no plans to merge these bodies. Bankers expect all three will look on the industry more favorably than their predecessors.