Major Banks Get Capital Rule Flexibility: What This Means for Markets

Financial regulators across the U.S. have finalized a major policy shift that will relax capital quotas for the nation’s most systemically important banks. JPMorgan Chase, Bank of America, Goldman Sachs, and Morgan Stanley are among the institutions set to benefit from this revised framework. The updated proposal has been forwarded to the White House for final approval and could be formally enacted in the coming weeks.

The Regulatory Shift: Loosening the SLR Framework

At the heart of this regulatory change lies a fundamental redesign of how the Enhanced Supplementary Leverage Ratio (SLR) operates under the Basel III framework. Rather than maintaining a fixed 2% buffer, regulators now propose tying each institution’s SLR buffer to its Global Systemically Important Bank (GSIB) surcharge—effectively creating a more tailored approach to capital adequacy.

The Federal Reserve’s June 2025 proposal outlines substantial relief for major financial players. For GSIBs like JPMorgan, Goldman Sachs, Bank of America and Morgan Stanley, total capital requirements would decrease by 1.4%, freeing up approximately $13 billion in capital buffers. The impact becomes even more pronounced for depository subsidiaries of these institutions, which could see capital requirements drop by as much as 27%—equivalent to $213 billion in additional operational flexibility.

How Banks Will Capitalize on Relaxed Capital Standards

With these constraints eased, major financial institutions gain newfound operational flexibility. The immediate beneficiaries will be lending divisions, where banks can now deploy additional capital toward credit expansion. Treasury trading desks stand to particularly benefit, gaining the breathing room needed to support market liquidity during periods of volatility or stress—a critical function that ensures financial system stability.

The capital relief also has implications for shareholder returns. By reducing the capital adequacy buffers they must maintain, banks can redirect funds toward strategic investments, business expansion, and potentially enhanced dividends. The net effect is a more competitive banking landscape where institutions can respond more dynamically to market opportunities without the previous regulatory constraints.

Timeline and Implementation

Regulatory consensus has already been achieved across major U.S. financial agencies. With the proposal now moving through White House review, formal adoption is anticipated within the next several weeks, assuming no unexpected administrative objections. The approval process represents a coordinated effort to modernize capital frameworks while preserving prudential safeguards—balancing growth opportunities against systemic risk management.

This represents a significant recalibration of post-financial-crisis regulations, signaling a shift toward more nuanced and institution-specific capital frameworks rather than one-size-fits-all requirements.