Federal Reserve unveils proposal for regulatory easing for major banks

WASHINGTON (Reuters) – The US Federal Reserve announced on Wednesday that it wanted to ease regulation of US lenders with less than $ 700 billion in assets, which would ease the burden on large corporations. Commercial lenders that do not have volatile business on Wall Street.

Under the Fed's proposal, medium-sized lenders, including the United States Bancorp (USB.N), Capital One Financial Corp (COF.N), PNC Financial Corp. (PNC.N) and Charles Schwab Corp (SCHW.N) would face lower liquidity and compliance requirements and smaller banks would benefit from even simpler treatment.

The proposal stems from a bill passed in May by Congress of Laws, which ordered the Fed to reduce the regulatory burden imposed on community and regional lenders.

Under the proposal, subject to a comment period and reviewable, there would be four levels of regulation for banks with assets over $ 100 billion. Those whose assets are between $ 250 and $ 700 billion could benefit from a reduced liquidity coverage ratio (CRL), which would require banks to hold high quality assets that could easily be converted cash. Banks of this order could see their liquidity needs reduced by up to 30 percent, the Fed said.

Smaller banks would have even less restrictive requirements and would face stress tests of their capital projects less often than the annual review the Fed is currently conducting.

Randal Quarles, vice president of the Fed for supervision, said the changes should "significantly" reduce compliance costs for banks without injecting a significant new risk into the banking system.

"These proposals embody an important principle: the character of the regulation must match that of a company," he said.

The proposed amendments will have no impact on US-based global systemic banks with significant capital market activity. These include JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N)

The proposal also gives the Fed the ability to impose stricter rules on banks with assets under $ 700 billion if they carry out higher-risk activities. The banking sector expressed disappointment. The proposal fails and does not solve the underlying problems related to banking regulation, said the Bank Policy Institute. "It's not enough to tailor regulations to banks' risk profiles," said Greg Baer, ​​who heads the group.

The proposal has also been criticized by advocates for stricter rules on Wall Street.

"The deregulation of some of the country's largest banks will make the financial system less secure, less stable and less secure against another crash," said Dennis Kelleher, president and CEO of the pro-reform group Better Markets.

One of the Fed's governors, Lael Brainard, voted against the proposal, saying it went beyond the Congress's intentions and exposed the financial system to unnecessary risks.

Although the proposal does not concern US subsidiaries of foreign banks, the Fed has announced its intention to propose a separate rule for them "in the near future". She also works with the Federal Deposit Insurance Corporation on making changes to dismantling plans in case of failure, called "living wills".