Shares of the largest banks in the U.S. made modest gains on Monday as the Federal Reserve showed other U.S. regulators possible changes to its bank-capital overhaul that would lighten the load on Wall Street lenders, according to sources familiar with the matter.
The revisions would walk back key parts of the landmark proposal — including one that might have had a large effect on big banks with sizable trading businesses, said the sources, who asked not to be identified, Bloomberg reported.
The Fed document does not give an updated estimate on how much more capital large banks would have to hold to protect against financial shocks, but early calculations suggest the proposed changes could lead to an increase as low as 5%, the people said.
The original version called for an overall hike of 16%.
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Such a retreat would be a win for Wall Street banks, which unleashed a fierce campaign after the proposal was unveiled last July.
Fed Chairman Jerome Powell and Fed Vice Chairman for Supervision Michael Barr, who is seen as the architect of the original plan, said the proposal was in for "broad and material changes," according to Bloomberg.
U.S. officials haven't yet reached an agreement, and it's unclear whether they can get a revised package across the finish line before the presidential election in November.
Key Office of the Comptroller of Currency (OCC) and Federal Deposit Insurance Corp.(FDIC) officials were open to walking back an important part of the proposal — known as market risk — but have indicated privately that they would resist any capital increase they consider too low, some of the people said.
The Fed hasn't made any decisions on timing, process or substance, a spokesman for the central bank said. The Fed isn't targeting a specific range and is instead focused on the substance of possible revisions, he said.
The FDIC and OCC declined to comment.
Bank Price Actions: JPMorgan Chase & Co. (NYSE:JPM) gained 1.31% on Monday, while Bank of America Corp. (NYSE:BAC) improved 1.34% and Citigroup Inc. (NYSE:C) picked up 2.25%. Wells Fargo & Co (NYSE:WFC) jumped 1.57% on Monday.
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