Why Wall Street banks want Democrats to back their capital relief

What happened

Wall Street banks expect significant regulatory relief from Republican regulators under US President Trump. The Federal Reserve is trying to finalize the biggest overhaul of bank capital rules since the 2007-09 financial crisis by year end, and banks hope Democratic support will make the changes harder to unwind.

Confirmed

Global impact / market context

Bank capital rules set how much of their own money banks must hold against loans. Looser rules free up cash for lending, trading or shareholder payouts, which can lift revenue and profit per sale, while also leaving banks less cushioned against losses.

Analyst inference

Democrats are seen by independent analysts as poised to win one or both chambers of Congress next month, and they have said they plan to probe Trump's agencies. That raises the chance the relief is challenged later, so banks want bipartisan cover to protect their wins.

Analyst inference

What to watch

1. The Federal Reserve is trying to finalize the biggest overhaul of bank capital rules since the 2007-09 financial crisis by year end. Confirmed
2. Wall Street banks hope Michelle Bowman, Trump's vice chair for supervision, can secure Democratic backing for the changes, which they believe would make them harder to unwind. Proposed
3. If Democrats win one or both chambers of Congress, they could probe Trump's agencies and the changes, so watch whether Fed leaders build cross-party support before the rules are finalized. Analyst inference

Evidence

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