US Federal Reserve unveils proposed easing of regulation for major banks

WASHINGTON (Reuters) – The US Federal Reserve on Wednesday unveiled a proposal to ease regulation 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 benefit from reduced liquidity and compliance requirements under the proposal, which the Fed board is expected to vote on Wednesday morning. Several smaller banks would see their regulation further reduced as the Fed implements congressionally mandated amendments to the deregulation of banks adopted in May.

The proposal sets four levels of regulation for banks with more than $ 100 billion in assets, with the central bank seeking to adapt the rules to large corporations. The proposal would set the strictest rules for global systemic US banks and remove the requirements for smaller and less complex companies.

The law easing the banking rules has urged the Fed to relax the rules applicable to banks whose assets are less than 250 billion dollars. It also left the discretion to the central bank to change the rules for large banks as it sees fit. Wednesday's proposal exceeds the $ 250 billion threshold allowed by Congress, as it aims to relieve all banks, with the exception of the country's largest banks.

According to the proposal, banks with assets between $ 250 and $ 700 billion could benefit from a reduced "liquidity coverage ratio", forcing banks to hold high-quality assets that could easily be converted into cash. The Fed estimated that the proposal could reduce this ratio up to 30% for these companies.

Smaller banks would be subject to less frequent 'stress tests' of their capital projects by the Fed and would be subject to even less restrictive capital and liquidity requirements.

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, according to prepared remarks.

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