FILE PHOTO: The Federal Reserve building is pictured on August 22, 2018 in Washington, DC. REUTERS / Chris Wattie / File Photo / File Photo
WASHINGTON (Reuters) – The US Federal Reserve put forward a proposal on Wednesday to ease regulations for banks with assets under $ 700 billion.
PNC Financial Corp. (PNC.N), Capital One Financial Corp. (COF.N), Charles Schwab (SCHW.N) and US Bancorp (USB.N) would have fewer liquidity and compliance requirements as proposed by the Fed Board on Wednesday morning. Several smaller banks would see further curtailment of regulation as the Fed ceases changes to a Congress passed in May on a deregulation law for banks.
The proposal provides for four regulatory levels for banks with assets in excess of $ 100 billion as the central bank seeks to set the rules for larger companies. The proposal would set the most stringent rules for global systemic banks in the US and reduce the requirements for smaller and less complex companies.
The Bank Rules Facilitation Act prompted the Fed to reduce the regulations for banks with assets under $ 250 billion, and also gave the central bank the power to change the rules for larger banks at its discretion. Wednesday's proposal exceeds Congress approved threshold of $ 250 billion as it seeks to remedy all but the largest banks in the country.
According to the proposal, banks with assets of $ 250 to $ 700 billion could enjoy a reduced "liquidity coverage ratio", which means that banks must hold high-quality assets that can easily be converted into cash. The Fed estimated that the proposal could reduce this ratio by as much as 30 percent for these companies.
Smaller banks would be subject to less frequent "stress tests" of their capital plans by the Fed and would face even less restrictive liquidity and capital requirements.
Randal Quarles, the Fed's deputy chairman for oversight, said the changes should "lower" compliance costs for banks without creating a significant new risk to the banking system.
"These proposals embody an important principle: the nature of the regulation should reflect the nature of a company," he said.
Reporting by Pete Schroeder; Arrangement by Chizu Nomiyama and Andrea Ricci