Fed Set to Raise Bank Oversight Thresholds

The US Federal Reserve is planning to raise the asset thresholds that trigger stricter oversight of big banks. The central bank aims to reindex the thresholds where banks become subject to stress tests, which would allow some lenders to avoid costly additional regulation and potentially spur consolidation.

Currently, rules impose stricter requirements when a bank reaches $100 billion in assets, stepping up at $250 billion and again at $700 billion. However, lenders say these thresholds, set in 2019, haven't kept pace with the economy, subjecting banks to increasingly stringent oversight that exceeds the risks they pose.

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

The changes could also lead to a wave of consolidation among midsize lenders that have been holding off for fear of breaching the thresholds. Bank boards would be able to assess deals on merit rather than on regulatory math.