Big bank capital requirements will drop slightly under revised drafts of sweeping bank capital rules, Federal Reserve Vice Chair for Supervision Michelle Bowman said Thursday, in a major victory for Wall Street lenders who faced capital increases under earlier drafts. Speaking at the Cato Institute in Washington, Bowman outlined changes to the so-called Basel rules and the “GSIB surcharge” that determines how much money banks must set aside to absorb potential losses. Overall, the changes will reduce big bank capital requirements by a “small amount” through a “sensible recalibration” of existing rules, said Bowman, who was appointed to the role last year by Republican President Donald Trump. Bowman said that while the changes would eliminate overlap and calibrate requirements to match actual risks, the steady increase in capital in recent years has been misleading and damaging.

“When capital requirements become excessive, it undermines the basic function of the banking system to provide credit to the real economy,” she said, according to prepared remarks.

The overhaul marks the culmination of years of efforts by Wall Street banks to ease regulations introduced after the 2007-09 financial crisis, which they and Trump-appointed regulators say are constraining lending and stifling economic growth.

A Morgan Stanley research note this week said the big banks currently have more than $175 billion in capital, and the clarification of rules could allow them to start using that cash through lending and share buybacks.

That expected result marks a dramatic turnaround for the industry, which faced 19% growth when the proposal was first unveiled by Bowman’s Democratic predecessor Michael Barr in 2023, prompting unprecedented pushback from the industry.

Bowman said on Thursday that if his planned changes were adopted, banks’ capital would return to 2019 levels.

Both rules, which are complex and lengthy, will be subject to industry feedback, and it is unclear when they will finally be finalized.