Fed Targets Higher Asset Thresholds for Stricter Bank Oversight

The U.S. Federal Reserve is working on a plan to adjust asset thresholds that trigger stricter oversight of big banks, allowing some lenders to avoid costly additional regulation and potentially spurring consolidation.

The central bank aims to reindex the thresholds where banks become subject to stress tests of their balance sheets, liquidity, capital, and other more stringent rules, to account for inflation and economic growth. The current rules impose stricter requirements when a bank reaches $100 billion in assets, stepping up at $250 billion and again at $700 billion.

Banks say those thresholds, set in 2019, haven't kept pace with the economy, subjecting banks to increasingly stringent oversight that exceeds the risks they pose. Crossing the $100 billion threshold typically requires major investment in compliance staff, risk management systems, stress-testing capabilities, and regulatory reporting infrastructure that can run into tens of millions of dollars annually.

The Fed plans to reindex the highest threshold closer to $1 trillion and some of the requirements triggered by the lower threshold closer to $150 billion. Banks like U.S. Bancorp, Capital One, PNC Financial, and Truist will benefit from this change, giving them more room to grow without incurring some of the toughest Fed oversight.