The Fed: Fed’s new plan would let regional banks reduce their buffers, S&P says

By

Senior economics reporter

The Fed has been sending the message that it wants to ease bank regulations.

The Federal Reserve’s new proposals to update its stress test will likely lead to lower capital levels for regional U.S. banks, and could result in a ratings downgrade for some, according to a S&P Global Ratings report released Tuesday.

Fed officials had said the stress test reform proposal was aimed at making capital regulation more efficient.

Read: Fed moves to simplify capital rules for large banks

But the S&P report, written by Stuart Plesser, said the Fed’s plan would likely permit most banks “ie regional banks” to reduce their current capital levels further.

“Overall, to the extent these modified regulations result in material capital reductions, we could lower ratings,” the report concluded.

In a separate note, Jaret Seiberg, an analyst with Cowen Washington Research, said his “thesis” is that regional banks, especially the biggest firms like PNC PNC, -0.14%  , U.S. Bank USB, -0.24%  , Capital One COF, -0.08%   and BB&T BBT, +0.92% are benefitting the most from the push in Washington to make banking rules less onerous.

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