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Wall Street banks see opportunities for looser capital rules as Trump ushers in a new era

By Piet Schröder

WASHINGTON (Reuters) – Encouraged by a friendlier incoming Trump administration and their success last year in watering down draft capital raises, major U.S. banks plan to push for an overhaul of other U.S. capital rules, industry executives said .

Industry goals include enshrining a much weaker version of the Basel Endgame capital rule, reducing a capital surcharge levied on global banks, reworking a key leverage constraint, and revising the Federal Reserve’s annual “stress tests,” which measure whether a bank could withstand an economic shock, said three executives with knowledge of the ambitious lobbying plan.

Under newly elected President Donald Trump’s first term, global U.S. banks scored some deregulation victories, including relaxing trade rules and simplifying stress tests. Global financial crisis of 2009.

These rules aim to prevent another crisis by requiring the largest US banks like JPMorgan Chase (JPM), Bank of America (BAC) and Goldman Sachs (GS) to collectively forgo nearly $1 trillion to cover potential losses on loans and trade. Banks say the demands are excessive and poorly tailored, and that some of that money could better serve the economy by being loaned out.

The industry tasted a partial victory last year after intense lobbying succeeded in halving the additional capital banks would have to hold under the Basel proposal, prompting the Fed to overhaul its stress-testing process.

Buoyed by these victories, and with Trump set to appoint new industry-friendly officials — including a new Federal Reserve regulator nearly 18 months earlier than expected — banks see a unique opportunity to reform capital rules, the people said. All three requested anonymity to discuss ongoing regulatory issues.

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David Solomon, CEO of Goldman Sachs – who lobbied hard to weaken Basel – said during his earnings call on Wednesday that he expected the change in government to lead to a new approach to capital rules.

“It feels like we’re in an environment where there can be a constructive discussion about improving the transparency, clarity and consistency around this,” he said.

After years of criticism over the financial crisis, major banks feel they are done apologizing, executives say. They point to the way big banks weathered the COVID-19 pandemic and their role in stabilizing regional banks during the 2023 turmoil as evidence that they are rock solid and will not have to tolerate tougher regulations.

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