The Federal Reserve will push for the most aggressive capital loosening since 2008, bringing a major positive for large Wall Street banks.

Bank of America Corp is about to see the biggest regulatory loosening since the 2008 financial crisis. Regulatory agencies will review a proposal this week to relax the enhanced supplementary leverage ratio (eSLR) requirements, which could inject strong momentum into Wall Street's large financial institutions. According to the schedule, the Federal Reserve will first discuss this long-awaited reform plan on Wednesday, with the Federal Deposit Insurance Corporation (FDIC) planning to start discussions on Thursday. The core reform targets the 5% eSLR capital red line that the eight major systemic important banks in the United States must adhere to, and regulators are considering lowering this hard indicator by 1.5 percentage points. If the proposal is implemented, financial giants such as JPMorgan Chase, Bank of America Corp, Goldman Sachs Group, and Morgan Stanley will directly benefit, with their capital release space expected to expand significantly. The deep logic behind this regulatory change is to activate the credit delivery ability of the banking system. With the size of the US government bond market now exceeding $30 trillion, regulators hope that by releasing bank capital, they can inject more liquidity into the real economy and cultivate stronger buying power for government bonds. Treasury Secretary Scott Benson has already sent a clear signal that this is an important part of the Trump administration's financial regulatory reform. Market analysis firms have picked up on positive signals from the policy shift. A research report from Deutsche Bank pointed out that this adjustment will allow institutions with a higher proportion of traditional investment banking business to receive greater benefits, potentially extending beyond just the release of capital. Michelle Bowman, the newly appointed head of banking supervision at the Federal Reserve, even stated that the eSLR reform is just the starting point of restructuring capital supervision, with subsequent reassessments of rules including the additional fees for globally systemically important banks and the threshold for regulatory classification. It is worth noting that this regulatory loosening cleverly echoes the market turmoil at the outset of the COVID-19 pandemic in 2020. At that time, the Federal Reserve was forced to intervene directly in government bond trading, exposing the drawbacks of capital constraints in the banking system under extreme pressure. Bowman emphasized that returning to leverage ratios as a traditional function of capital buffers can both enhance the ability of financial institutions to withstand pressure and reduce the necessity for central bank intervention in the market, aligning with Federal Reserve Chairman Powell's concerns about market liquidity in the government bond market in February of this year. At the operational level, the regulatory reform signals simultaneously released by the Federal Reserve also include adjustments to the review mechanism, with reputation risk no longer being a hard indicator for bank evaluations. Bowman specifically stated in a speech: "Regulatory frameworks should not be built on static models that are forgotten after they are set," but also emphasized that "a solid capital foundation is always the ballast for financial stability." This statement striking a balance between regulatory loosening and risk control. For bank CEOs like Jamie Dimon of JPMorgan Chase, this regulatory change comes at an opportune time. With the Federal Reserve meeting approaching on July 24, the global financial sector is eagerly awaiting: will this pending capital loosening become a landmark event in the transformation of the banking industry's regulatory paradigm post-crisis era.