Zhitong Finance and Economics APP learned that, according to informed sources, the Federal Reserve is considering modifying the rules, which could save the eight largest banks in the United States billions of dollars in capital, which may be a long-awaited victory for the banking industry.

The problem is how the Federal Reserve calculates the additional capital requirements, or the so-called 'GSIB additional capital requirements' imposed on globally systemically important banks (GSIBs) in the United States. This additional capital requirement was introduced by the Federal Reserve in 2015 to enhance the safety and soundness of these banks.

According to sources, the Federal Reserve is considering updating the calculation method it established in 2015 to adjust for economic growth and more accurately reflect a bank's relative size to the global economy.

Updating the 'coefficients' will lower banks' systemic scores and the resulting additional capital costs, according to insiders.

Insiders say the Federal Reserve's discussions are ongoing and no decisions have been made yet.

But the Federal Reserve's willingness to review this issue indicates significant progress for large US banks seeking to reduce additional capital requirements.

The amount of capital the eight banks, including JPMorgan Chase, Citigroup and Bank of America, can save will depend on many factors, including their business models.

According to Federal Reserve data, globally systemically important banks (GSIBs) in the United States will hold about $230 billion in additional capital in the first quarter of 2024, indicating that even small changes could save some banks a lot of money.

According to Reuters calculations, a 0.5% additional fee is equivalent to more than $8 billion for JPMorgan Chase and Bank of America. Banks say they can reinvest this cash into the economy by lending.

Globally systemically important banks in the United States also include Wells Fargo & Co, Goldman Sachs, Morgan Stanley, Bank of New York Mellon and State Street.

The Basel Battle.

According to insiders and other industry sources, Federal Reserve officials have long been reluctant to review these coefficients for fear of being seen as providing assistance to a few large banks.

But last year, the Federal Reserve, together with two other US regulatory agencies, unveiled the 'Basel endgame' proposal, which would increase the capital of globally systemically important banks and other large banks, sparking debate. Federal Reserve officials argued that the plan would more accurately measure the risk of bank losses.

At the same time, the Federal Reserve proposed to make the GSIB additional capital requirements more sensitive to banks' risks, a change the Federal Reserve itself could make.

Large banks would be the most affected by the Basel proposal, as they claim the agreement would limit lending.

It is reported that the Federal Reserve sympathizes with these complaints and is working to amend the proposal, but any concessions must be approved by other regulatory agencies. However, other regulatory agencies are unwilling to make changes.

Some industry insiders say that updating the additional capital requirement coefficients is a way for the Federal Reserve to independently offset the impact of the Basel agreement on large banks.

However, another insider said that the two projects are not related, and Federal Reserve officials are pushing forward independently.

Sources said that if the Federal Reserve wants to change the coefficients, it may choose to reintroduce its rules and solicit more public feedback, which may delay the final decision by several months.