Big banks are close to getting one of biggest regulatory rollbacks since 2008

US regulators this week are expected to weigh one of the most dramatic rollbacks of bank capital rules since the 2008 financial crisis, which would give a major victory to lenders seeking relief from the new Trump administration.

The change that the Federal Reserve will consider on Wednesday would affect the so-called enhanced supplementary leverage ratio (eSLR), a rule that calls for the largest US banks to hold additional minimum capital based solely on their size. The FDIC is also expected to discuss the proposal Thursday.

The largest and most important US lenders, such as JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs Group (GS), and Morgan Stanley (MS), currently must keep those eSLR ratios at 5%. The proposal being considered by regulators would lower that requirement by 1.5 percentage points, according to a Bloomberg report.

The change to this key capital ratio is designed to make it easier for banks to lend freely and to create an even bigger pool of buyers for US Treasurys during a period where there is rising concern over foreign demand for US debt.

Treasury Secretary Scott Bessent previously signaled that regulators were close to easing this capital rule as part of a broader deregulatory push by the Trump administration.

Such an adjustment would be "broadly positive for the biggest banks," TD analyst Jaret Seiberg said in a recent research note. He added that it would help "the traditional trading banks more than the traditional commercial banks."

The Fed's new top banking regulator Michelle Bowman made it clear in a speech Monday that revisiting the eSLR requirement is just the start of broader capital rollback considerations.

"This proposal takes a first step toward what I view as long overdue follow-up to review and reform what have become distorted capital requirements," said Bowman, the Fed’s vice chair for supervision and a Fed governor.

Other capital requirements under consideration for future adjustment include the surcharge on global systemically important banks and the various asset thresholds that determine which banks face what rules.

This will undoubtedly please the bosses of some giant banks, including JPMorgan CEO Jamie Dimon, who has called for regulators to revisit many of their rules.

On July 22, the Fed will host a conference to bring together leaders to discuss the capital framework for US banks.

The Fed also said Monday it will no longer consider reputation risk as part of its bank exams, in another sign of a readjustment under new leadership.