Fed's Regulatory Chief Unveils Major Revisions to Basel Endgame Draft

The Federal Reserve's regulatory chief, Michael Barr, announced significant changes to the Basel Endgame draft rule after facing industry criticism. The revisions include lowered risk-weights for various loans, scrapping a minimum haircut for securities financing transactions, and adjustments in operational risk capital requirements.

The Federal Reserve's regulatory chief, Michael Barr, on Tuesday announced significant revisions to the Basel Endgame draft rule aimed at increasing bank capital, following extensive industry feedback. The revised proposal, expected to be published in upcoming weeks, will require the central bank's board approval.

The modifications address credit risk capital requirements, reducing risk-weights for residential real estate and retail loans. The revised draft also extends preferential treatment for low-risk corporate exposures to investment-grade entities that are not publicly traded, including pension and certain mutual funds.

Additionally, the update eliminates the proposed minimum haircut for securities financing transactions. For equity exposures, Barr plans to lower risk weights for tax credit equity funding structures. Notably, the operational risk framework will see fundamental changes, including a shift in measurement criteria and lower capital requirements for investment management activities. The new draft also simplifies market risk and derivatives assessments for large non-GSIB banks.

(With inputs from agencies.)