U.S. banking industry's new capital regulation proposal has once again been reported to significantly reduce the capital requirements.

On Monday, September 9th, Eastern Time, Bloomberg reported, citing sources familiar with the matter, that after regulatory agencies agreed to comprehensive revisions to the proposed package of rules, the new regulation proposal will require the largest banks in the United States to increase their capital by 9%, a significant reduction from the original plan.

The new banking regulation proposal released by the Federal Reserve and other U.S. regulators in July last year required banks with assets over $100 billion to increase their capital by about 16%. Among them, the capital requirements for the eight largest U.S. banks, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley, may face an increase of about 19%. Other banks with assets between $100 billion and $250 billion will see an approximate 5% increase in capital requirements.

A few months ago, it was revealed that the aforementioned banking regulations were expected to significantly relax requirements. In June of this year, media reports indicated that the Federal Reserve showed other regulatory agencies a revised proposal that noticeably reduced the capital requirements for large trading banks, potentially revoking some key proposal content, especially those parts that could have a significant impact on large banks, particularly those with extensive trading operations. Based on the revised proposal, the increase in bank capital could be reduced from the initial 16% to as low as 5%.

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The aforementioned Bloomberg report on Monday suggested that the significant reduction in capital requirements is more likely to be an attempt to appease banks. After the new regulation proposal was introduced in July last year, the banking industry launched a lobbying campaign that was among the most intense in history. The revised proposal could also help Federal Reserve Chairman Powell achieve the goal of gaining broad support within the Federal Reserve.

Last month, Wall Street Journal reported that, according to media sources, on July 19th of this year, Powell attended a closed-door meeting with a group of CEOs from major banks, where he encouraged these leaders to cooperate with the Federal Reserve to avoid getting entangled in legal disputes that could last for years due to the proposal of new capital regulations. The meeting was hosted by the Financial Services Forum, an industry organization of major U.S. banks, with participants including the CEOs of the four largest U.S. banks—JPMorgan Chase, Morgan Stanley, Citigroup, and Bank of America.

At the aforementioned meeting, the CEOs of major banks asked Powell whether the Federal Reserve would act independently of other regulatory agencies when announcing key revisions and soliciting public comments. Some participants revealed that Powell gave them the impression that the Federal Reserve might act independently of other regulators in announcing the revised regulation proposal. Powell referred to the European Union's implementation of the Basel Accord regulations, noting that the EU's version would increase banks' capital by 10% overall.

The media learned that Powell's comments on the capital regulation proposal to the banks at the aforementioned meeting were described as high-level comments, focusing on how he intends to reach the final regulations and finalize the regulations in part by seeking new public opinions and publishing research on the impact of related proposals. Powell told the major banks that they should now submit questions to the Federal Reserve to avoid future litigation.

At the congressional hearing related to the Federal Reserve's monetary policy report in July, Powell told lawmakers that the United States has "made significant progress" in modifying regulations in accordance with the Basel Accord, and the regulatory authorities are "very close" to making a decision on the final revision of the new regulation proposal.

Powell believes that regulators should solicit more opinions on the U.S. version of the Basel Accord regulations. He expects that after the Federal Reserve issues the revised proposal, it will seek a period of public comment, which is likely to be about 60 days.