Trump Administration Prepares to Ease Bank Capital Requirements
Regulators under the Trump administration are set to unveil a softened draft of bank capital rules this week, delivering a significant victory to Wall Street firms that have lobbied against more stringent requirements. The expected changes mark a departure from the tougher Basel III framework, which would have forced banks to hold more capital in reserve. By easing these requirements, the new rules are expected to free up capital, potentially boosting bank profitability through increased lending, investments, and shareholder returns.
New Rules Could Recapture Mortgage Market Share After It Fell to 35%
The most immediate impact of relaxed capital rules could be in the U.S. mortgage market, where banks' role has diminished significantly. After accounting for roughly 60% of mortgage originations in 2008, banks' share had fallen to approximately 35% by 2023. A key factor has been the punitive capital treatment of Mortgage Servicing Rights (MSRs), which carry a 250% risk weight. A forthcoming proposal is expected to specifically review this risk weight, potentially making it much more attractive for banks to hold MSRs and originate mortgages. The current rules have pushed banks toward other lending areas with better risk-adjusted returns.
Executives are already signaling their intent to expand if the rules change. Western Alliance, whose AmeriHome Mortgage unit originated $55 billion in 2025, sees a major opportunity. Its chief banking officer, Steve Curley, noted the potential for capital relief on MSRs would be the “biggest change.” Other institutions like Citizens Bank, which aims to double its mortgage penetration from its current 6% of clients, see an opening to make mortgages a more competitive product. By tying capital requirements more closely to loan-to-value ratios, the new framework could reward the low-risk lending that many banks already practice.
US Policy Shift Pressures EU to Delay Competing Bank Reforms
The American move toward deregulation is creating ripple effects across the Atlantic. The European Union is now expected to delay its own global banking reform plan to avoid putting its banks at a competitive disadvantage. EU officials are concerned that proceeding with stricter capital requirements while the U.S. adopts a lighter touch would disproportionately burden European lenders. This dynamic highlights the global implications of U.S. financial policy, forcing international regulators to react to prevent capital and business from flowing toward markets with more favorable rules.
Edgen Stock·Mar 18 2026, 10:36