Overhaul of Regulatory Capital Requirements Proposed By US Banking Regulators, Part 1

Global Financial Markets

The US federal banking regulators have jointly proposed extensive revisions to the regulatory capital requirements for midsize and larger US banking organizations. The revisions are lengthy and would change the requirements for credit, market, and operational risk. Some of the revisions are long-expected (e.g., re-evaluation of use of internal models), but others are novel (e.g., capital charge for operational risk) or driven in response to the recent banking crisis. Further, the revisions are expected to materially increase the amount of capital that many larger banking organizations must hold, which may lead to a decline in bank lending and bank trading activities.

Mayer Brown partners Matthew Bisanz and Jeffrey Taft have a high-level discussion of the proposed revisions. Future episodes will explore how the revisions may affect securitization, capital markets, and fund finance.