Senator Mazie K. Hirono (D-HI) has joined forces with 11 other senators in a call to the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), among others, to implement a final rule on capital for banks. Despite proposing a rule on regulatory capital in July 2023, the Federal Reserve has yet to officially adopt this proposal as a final rule.
Hirono collaborated with senators Sherrod Brown (D-OH), Jack Reed (D-RI), Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Catherine Cortez Masto (D-NV), Tina Smith (D-MN), John Fetterman (D-PA), Richard Blumenthal (D-CT), Brian Schatz (D-HI), Angus King (I-ME), and Tammy Duckworth (D-IL). Together, they urged FDIC Chair Martin Gruenberg, Federal Reserve Chair for Supervision Michael Barr, and Acting Comptroller Michael Hsu to make the proposed rule permanent.
The senators collectively wrote, "Capital is the linchpin of safety and soundness in our banking system. When a bank uses more capital to fund its investments and activities instead of debt, it is investors and shareholders, not workers and taxpayers, that take a hit if the bank faces challenges. Strong capital is the shock absorber on banks’ balance sheets during economic downturns. It allows banks to keep making loans exactly when businesses and households might need an economic lifeline the most," according to a news release from Hirono’s office dated January 22.
On July 27, 2023, the Board of Governors of the Federal Reserve System announced individual capital requirements for large banks. These were expected to come into effect on October 1, 2023. The common equity tier 1 capital requirement included components such as: a minimum capital requirement of 4.5 percent, a stress capital buffer requirement determined from stress test results, and a capital surcharge for global systemically important banks (G-SIBs), updated annually to account for each G-SIB's overall systemic risk. Banks falling below their total requirement may face restrictions.
The Financial Times reported on January 23 that Hsu had countered complaints from banks that the proposed restrictions would increase their borrowing costs. The proposals from US regulators stipulate that banks would need to hold an additional $2 for every $100 of risk-weighted assets, according to the Financial Times. Hsu stated that banks need to provide an analysis on share buybacks and dividend policies affected by the proposed rates.