The 2026 proposals are now subject to a public comment period ending on June 18, 2026, before finalization.
On March 19, 2026, U.S. federal banking agencies released a series of proposed rules that would (i) lower the amount of capital banks are required to hold against potential losses, (ii) change the risk weights that other banking organizations apply to credit exposures and (iii) change the method for calculating the capital surcharge for Global Systemically Important Banks (G-SIBs). If finalized, the 2026 banking proposals would represent some of the most significant changes to bank capital standards since the reforms enacted in the wake of the 2008 financial crisis. The 2026 proposals exceed 1,500 pages and address nearly every section of the existing regulatory capital requirements. Comments on the proposals are due by June 18, 2026. This Alert focuses on several key points to (i) provide background on the existing post-crisis capital framework, (ii) detail how the proposals would modify those requirements and (iii) outline the potential impact for banks and borrowers.
Background: The Post-Crisis Capital Framework
In the wake of the 2008-09 financial crisis, which required massive government bailouts of major financial institutions, U.S. policymakers and regulators enacted sweeping reforms centered on significantly higher capital requirements, tightened supervisory controls and enhanced stress-testing regimes. The goal of these reforms was, in part, to prevent the need for future taxpayer bailouts and to correct what policymakers considered insufficient oversight that allowed excessive risk-taking in subprime mortgage markets and financial derivatives. As a result of these reforms, large banks today maintain capital reserves that are more than double their pre-crisis levels, reflecting approximately $1 trillion in additional loss-absorbing capacity built up over the past two decades.
A key pillar of this framework is the international regulatory agreement known as Basel III, which provides an outline for determining how much capital banks must set aside based on the nature and magnitude of risks they carry. The largest, most interconnected U.S. institutions, designated as G-SIBs, face an additional layer of capital known as the G-SIB surcharge, which is calibrated to reflect each institution’s systemic footprint.
While these measures undeniably strengthened the resilience of the banking system, the heightened requirements also had the effect of discouraging banks from pursuing traditional lending activities. This, in turn, created an opening for less-regulated nonbank firms to capture a growing share of the market, while simultaneously increasing the regulatory burden on the banks themselves.
The 2026 Proposals
The 2026 proposals, led by Federal Reserve Vice Chair for Supervision Michelle Bowman, seek to implement the remaining elements of the Basel accords while simultaneously streamlining the overall capital framework and reducing regulatory overlap. The package consists of three interrelated proposals:
- The Basel III proposal would replace the current "dual stack" approach, which requires large banks to calculate capital under two methodologies and apply the higher result. Under the 2026 proposals, banks would instead use a single “expanded risk-based” ratio, with standardized methodologies for credit, operational and market risk. Standing alone, this component would produce a modest 1.4 percent increase in capital, on average, for some banks.
- The G-SIB surcharge proposal would update the fixed coefficients used to calculate the surcharge to account for economic growth and inflation. This could reduce capital for eight of the G-SIB banks by 3.8 percent.
- A revised “standardized approach” would reshape how smaller banks calculate risk-based capital. To encourage greater participation in mortgage lending and servicing by banks of all sizes, regulators propose removing the requirement to deduct mortgage-servicing assets from capital. Instead, these assets could be included in capital calculations, with a 250 percent risk weight applied.
Collectively—and factoring in separate changes already proposed for the annual stress-testing process—the 2026 proposals would lower the amount of Common Equity Tier 1 capital required by an estimated 4.8 percent for the largest banks, 5.2 percent for midsize institutions and 7.8 percent for smaller banks. Even after these reductions, the largest U.S. banks would still hold in excess of $800 billion in capital—roughly twice the levels maintained before the financial crisis.
The 2026 proposals are now subject to a public comment period ending on June 18, 2026, before finalization.
Implications for Banks and Borrowers
The impact of the 2026 proposals will vary by banking organization and asset class. For banks, they would free up billions of dollars in capital that could be redeployed toward lending, share buybacks, dividends and strategic investments, though the precise impact will vary significantly by institution depending on business model and balance sheet composition. For borrowers, regulators expect the changes to ease credit availability, particularly in the mortgage market, where banks have steadily ceded ground to nonbank lenders, and in commercial and consumer lending more broadly.
For More Information
If you have any questions about this Alert, please contact Jonathan M. Petrakis. Joel N. Ephross, Max W. Fargotstein. any of the attorneys in our Banking and Finance Industry Group or the attorney in the firm with whom you are regularly in contact.
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