Description

On July 27, 2023, U.S. federal banking regulators jointly released proposed changes to the capital requirements for midsize and larger U.S. banking organizations. These revisions were expected to be one of the most consequential changes to U.S. banking regulation since the 2010 passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, the future of these rules remains uncertain based on the banking industry's objections and the new administration's approach to streamline capital and liquidity rules in opposition to the Basel III Endgame.

The Basel III Endgame revisions are lengthy and significantly change the requirements for credit, market, and operational risk. Some of the revisions are long expected (e.g., reevaluation of the use of internal models), but others are novel (e.g., capital charge for operational risk) or driven in response to the 2023 banking crisis. Further, the revisions materially increase the amount of capital that many larger banking organizations must hold, which may lead to a decline in bank lending and bank trading activities.

On July 10, 2025, federal banking agencies published a proposed rule to change the enhanced supplementary leverage ratio (eSLR) for U.S. global systemically important bank holding companies (GSIBs) and their subsidiary banks, as well as total loss-absorbing capacity (TLAC) leverage buffer and long-term debt requirements (LTD) for U.S. GSIBs. These changes are intended to make capital and leverage requirements more efficient and encourage banking organizations to engage more readily in low-risk or low-return activities.

Terms and provisions in loan documents can affect certain loans' classification and their treatment under the capital rules. Some loans can be structured to avoid being subject to certain capital charges. Bank counsel must have a thorough understanding of the capital rules' nuances to minimize their impact on profitability in any given transaction.

Listen as our authoritative panel of regulatory and finance attorneys analyzes the current state of U.S. bank capital rules and their impact on the commercial lending environment and provides guidance on how lenders may want to alter loan structures and loan documentation to accommodate the current and future regulatory framework.