Fed Prepares to Lift Thresholds That Trigger Stricter Bank Oversight

The Federal Reserve is set to increase the asset thresholds that trigger stricter oversight for large banks, according to Reuters. Sources indicate the Fed is contemplating raising the lower threshold from $100 billion to around $150 billion, and the higher threshold from $700 billion to nearly $1 trillion. These thresholds dictate additional regulatory measures, including stress tests of banks' balance sheets, liquidity, and capital requirements.

Banks would also face higher compliance costs, including additional staff for regulation, risk management systems, and reporting infrastructure. The Fed's decision to lift these thresholds would account for inflation and economic growth since their 2019 implementation, potentially easing regulatory burdens on some banks. The Federal Reserve could announce the new thresholds later this year.

Federal Reserve Vice Chair for Supervision Michelle Bowman suggested the Fed would consider reindexing these thresholds in January, but no further comment has been made since then. The Fed has also taken steps to reduce the regulatory burden on banks, including reorganizing its bank oversight unit and proposing streamlined capital requirements in March.