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Fed to Finalize Rule Easing Burden for All but Wall Street Banks

The new system would assign each bank to a tier, depending, among other things, on its total assets.

Fed to Finalize Rule Easing Burden for All but Wall Street Banks
The Marriner S. Eccles Federal Reserve building stands in Washington, D.C., U.S.(Photographer: Andrew Harrer/Bloomberg)

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The Federal Reserve will meet next week to finalize rules that will ease burdens for smaller banks while keeping the heaviest pressure on Wall Street lenders.

The so-called tailoring has been one of the key initiatives for Fed governors appointed by President Donald Trump, and all but the biggest banks can expect some relief from the main rules put in place after the 2008 financial crisis. The effort was largely driven by legislation Congress passed last year, and the Fed board is set to vote on a final rule Oct. 10, the agency said Thursday.

The Fed estimated that it would reduce industrywide capital by about $8 billion, lower liquidity demands by several billion dollars and reduce the cost of compliance for smaller banks. Lenders such as U.S. Bancorp, Capital One Financial Corp. and PNC Financial Services Group Inc. would be further separated from Wall Street firms in terms of regulatory classification, with the Fed arguing that they aren’t as important to the financial system.

The new system would assign each bank to a tier, depending not only on its total assets but also on its dependence on riskier short-term funding, its scale of off-balance sheet exposures and how much business it does outside the U.S.

The Fed had also proposed a similar approach in April for foreign banks, such as Deutsche Bank AG, Barclays Plc and Credit Suisse Group AG, expecting that those firms would face higher demands for bigger stockpiles of easy-to-sell assets to guard against losses.

To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net

To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Gregory Mott

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