-Source-CNBC-
Smaller banks would face "significantly" reduced regulations while larger institutions would see largely the same scrutiny under rules the Federal Reserve proposed Wednesday.
The changes would be the latest moves the central bank has made to reduce the regulatory burden for community and regional financial institutions, unwinding some of the restrictions put in place after the financial crisis. The central bank voted 3-1 to approve a draft of the plan; Governor Lael Brainard opposed.
"The proposals before us would prescribe materially less stringent requirements on firms with less risk, while maintaining the most stringent requirements for firms that pose the greatest risks to the financial system and our economy," Fed Chairman Jerome Powell said in a statement. "And the proposals seek to maintain a middle ground for those firms that are clearly in the middle."
Under the plan, banks could be divided into four categories, each with different risk profiles.
The lowest rung would entail banks with between $100 billion and $250 billion in assets. They "would be subject to significantly reduced requirements" including exclusion from stress tests the Fed conducts to see how banks would hold up in the face of another financial crisis.
The next level would be those with $250 billion or more in assets or with $100 billion in assets that "exceed certain risk thresholds." They would be subject "enhanced standards," which would be tailored to meet the banks' risk profiles.
A third category would focus on those with "global scale," or assets at $700 billion or more or with $75 billion cross-jurisdictional activity. They would have "more stringent prudential standards." The final category, considered global systemically important banks, or GSIBs, would have the same highly stringent standards adopted after the crisis. Read more
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