The Federal Reserve is poised to ease the regulatory framework for large banks, loosening liquidity standards for some and extending filing periods for how often banks must submit "living wills."
The proposals, which the Fed is expected to finalize at an Oct. 10 board meeting, would mark another overhaul to how regulators implement postcrisis Dodd-Frank banking regulations.
The eight U.S.-based global systemically important banks, including JPMorgan Chase & Co. and Wells Fargo & Co., would see few major changes to the way they are regulated. But under one proposal the Fed has laid out, the eight G-SIBs would face reduced filing requirements for their living wills — resolution plans in which firms detail how they would be resolved during hypothetical bankruptcies.
The companies would have to submit living wills every two years rather than annually, which the Fed says formalizes the regulator's practice of recent years. Every other cycle, the G-SIBs would submit a "targeted" resolution plan with fewer details.
An overhaul of filing requirements for living wills would also occur for other large-but-less-complex firms. Some domestic and foreign banks would be able to file living wills every three years, though the requirements would vary depending on how risky the Fed deems them to be. Some domestic banks with between $100 billion and $250 billion in assets would no longer be required to submit such plans.
Fed Vice Chairman for Supervision Randal Quarles said the proposal is aimed at boosting "the efficiency of the firms without compromising the strong resiliency of the financial sector." But Fed Governor Lael Brainard, an Obama administration appointee, has opposed the proposal as well as a separate plan overhauling other regulatory requirements for large banks. Brainard is likely to vote against the Fed's final rules.
The latter proposal would make significant tweaks to how large banks comply with postcrisis rules, dividing banks into four categories depending on their size and complexity.

The eight U.S.-based G-SIBs would fall into the top category and continue to face the strictest standards. Although the proposal offers few adjustments from the G-SIBs' current regulatory regime, the Fed's completion of the rule "may provide regulators more bandwidth to examine" whether they should make any changes to how G-SIBs are regulated, Raymond James analyst Ed Mills wrote in a research note.
Potential areas the Fed may look at next are finalizing a stress capital buffer for large banks, adjusting the current G-SIB surcharge framework and overhauling how the Fed would implement a countercyclical capital buffer, Mills wrote.
The Fed's proposal would also leave rules largely unchanged for banks in the next category, those that are not G-SIBs but have at least $700 billion in assets or at least $75 billion in a Fed-defined measure of cross-jurisdictional activity.
Northern Trust Corp. met the Fed's proposed cross-jurisdictional activity threshold and would be the only domestic bank in the second bucket under the Fed's proposal. The company wrote a comment letter to the Fed arguing that its balance sheet is smaller than those of many regional banks and that its operations are "relatively simple," adding that the Fed's measure of cross-jurisdictional activity was over-inclusive.
The third category of domestic banks, which includes U.S. Bancorp, PNC Financial Services Group Inc. and Capital One Financial Corp., would see a more significant easing of rules. For example, their requirements under the liquidity coverage rule would be lowered, requiring firms to meet between 70% and 85% of their current LCR standards.
Brainard has voiced concerns over the reduced requirements for such firms, saying the Fed's proposal went further than Congress intended when it directed regulators to overhaul how they regulate the banking industry.
The fourth category of domestic banks would no longer be subject to LCR requirements. They also would be switched to a two-year stress test cycle instead of an annual one, a change the Fed implemented on an interim basis for the 2019 stress test cycle.
Some foreign banks' intermediate holding companies, or IHCs, would be subject to slightly tougher liquidity rules under a similar Fed proposal affecting foreign banks. The proposal stopped short of adding tougher liquidity standards to those IHCs' subsidiaries, though it requested comments on whether that was appropriate. The Fed could provide an update on the issue at the Oct. 10 meeting.
