Fed Plans to Raise Bank Oversight Thresholds Amid Calls for Reform

The US Federal Reserve is considering raising bank oversight thresholds to account for inflation and economic growth. According to sources, the Fed plans to reindex the thresholds where banks become subject to stress tests of their balance sheets, liquidity, capital, and other more stringent rules.

Currently, stricter requirements are imposed on banks when they reach US$100 billion in assets, with additional regulations kicking in at US$250 billion and again at US$700 billion. However, lenders argue that these thresholds have not kept pace with the economy, subjecting banks to overly stringent oversight that exceeds the risks they pose.

The Fed is planning to raise the highest threshold closer to US$1 trillion and adjust some of the requirements triggered by the lower threshold closer to US$150 billion. This change could benefit lenders such as U.S. Bancorp, Capital One, PNC Financial, and Truist, which are near the US$700 billion threshold.

The move is part of a broader effort to reform bank oversight, with officials citing concerns that current rules are stifling lending and the economy. Some experts predict that the changes could lead to consolidation among mid-size lenders, as they may be more willing to grow without incurring additional regulatory costs.