US Banks May Gain $320 Billion in Capital Under Revised Regulatory Framework

U.S. Banks May Release Up to $320 Billion in Capital Under Revised Rules

New York, April 8 - Regulators' revised draft rules on capital levels at big U.S. banks could lead to the release of up to $320 billion in capital, according to estimates by Morgan Stanley analysts. This amount represents a 20% increase over the current excess capital of $266 billion, which 36 banks are expected to have once the new capital rules are implemented.

The Federal Reserve announced last month that capital levels at big U.S. banks would fall by between 4.8% and 7.8% under softened draft "Basel" and "GSIB surcharge" rules. This development is seen as a major victory for the industry, as it would free up billions of dollars for lending, dividends, and share buybacks.

Morgan Stanley expects banks to provide preliminary ranges of capital they will be able to release once the rules are implemented during their first-quarter earnings calls. JPMorgan CEO Jamie Dimon has indicated that the bank could have around $40 billion in excess capital available once the regulatory changes are implemented.

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The implementation timeline for the revised rules remains unclear, with some analysts suggesting it may not happen until next year, while Morgan Stanley believes the changes could be finalized by the third quarter. Banks are currently reviewing the proposals.

The revised rules are expected to benefit regional banks the most, as the risk attributed to credit is being reduced. Goldman Sachs and Citigroup are likely to be the stand-out winners from a reduction in the surcharge for globally systemically important banks, or "GSIBs."