- U.S. bank regulators are pursuing rapid deregulation in 2025, easing leverage, capital, and lending constraints to boost large-bank liquidity and profitability.
- Changes including the eSLR overhaul, rollback of leveraged-lending guidance, and reduced TLAC/LTD buffers could free hundreds of billions in capital, especially for GSIBs.
- Regulators are simultaneously accelerating AI-related financial-services rules, heightening operational, cybersecurity, and technology-risk focus even as supervision narrows to “material risk.”
- Critics warn looser rules may raise systemic risk and widen international divergence, complicating Basel III/3.1 alignment and weakening financial-stability safeguards.
Read More
In 2025, the U.S. banking sector is observing a rapid deregulation trend orchestrated through rule changes by the FDIC, OCC, and Treasury, as well as shifts in supervisory focus under the Financial Stability Oversight Council (FSOC). Key policy reforms such as relaxed leverage requirements, the rollback of high-risk lending guidance, and amendments to capital and TLAC/LTD buffers reflect an overall agenda to enable banks—particularly large, systemically important ones—to reallocate capital toward lending and trading activities, especially U.S. Treasury and low-risk lending. ([reuters.com](https://www.reuters.com/sustainability/boards-policy-regulation/us-bank-regulator-approves-relaxed-leverage-rules-2025-11-25/
These regulatory changes carry material implications for bank profitability. The easing of the Enhanced Supplementary Leverage Ratio (eSLR) could release over $200 billion in capital for depository institution subsystems of GSIBs, affording them more flexibility in Treasury intermediation or making higher-yield loans. Easing TLAC (Total Loss-Absorbing Capacity) and LTD (Long-Term Debt) buffer requirements similarly lower funding costs, enhancing return on equity. ([reuters.com](https://www.reuters.com/sustainability/boards-policy-regulation/us-bank-regulator-approves-relaxed-leverage-rules-2025-11-25/
The fast-tracked rulemaking around AI and innovation—such as the OCC’s modernization drive and upcoming consumer protection rules tied to AI tools—is a complementary development. These rules reflect not only technology risk management but also strategic opportunity: banks that navigate compliance efficiently may gain competitive advantages in data-driven products and services. But operational risk, especially cyber threats and vendor third-party risks, looms large. ([pwc.com](https://www.pwc.com/us/en/industries/financial-services/library/our-take/12-19-2025.html
Internationally, divergence is increasing. The UK has delayed implementation of Basel 3.1 until 2027––while the U.S. regulatory authorities continue to shape their version of the Basel Endgame, likely diluting or altering risk-weighted asset rules. Without aligned standards, banks operating globally may face capital arbitrage, regulatory uncertainty, and mismatched expectations from investors and counterparties. ([marketwatch.com](https://www.marketwatch.com/story/the-u-k-again-delays-key-banking-rule-saying-it-will-wait-for-u-s-to-decide-first-38440004
Open questions remain around the long-term systemic risks of these loosened rules. Key issues include whether relaxed guidance leads to loosening in credit underwriting standards, whether regulatory oversight can keep pace with technological change, and whether U.S. actions erode global regulatory frameworks’ credibility. Strategically, investment banks should be preparing for higher deal activity and liquidity flows, but be cautious about concentration risks, counterparty vulnerabilities, and regulatory reputational exposures. Implementation timelines—such as April 2026 for some capital rule changes—will be important to track. ([reuters.com](https://www.reuters.com/sustainability/boards-policy-regulation/us-bank-regulator-approves-relaxed-leverage-rules-2025-11-25/
Supporting Notes
- FDIC approved new rules easing leverage requirements, particularly targeting low-risk assets, reducing enhanced supplementary leverage ratio for depository subsidiaries of large banks; effective April 1, 2026. ([reuters.com](https://www.reuters.com/sustainability/boards-policy-regulation/us-bank-regulator-approves-relaxed-leverage-rules-2025-11-25/
- Rollback of 2013 leveraged lending guidance by FDIC and OCC widens banks’ discretion in underwriting high-leverage loans, especially for PE-backed and loss-making companies. ([wsj.com](https://www.wsj.com/finance/banking/regulators-relax-rules-on-high-risk-lending-for-banks-9eec9ffa
- In 2024, private credit funds absorbed over $700 billion in risk-lending—outpacing banks in certain sectors before regulatory rollback. ([wsj.com](https://www.wsj.com/finance/banking/regulators-relax-rules-on-high-risk-lending-for-banks-9eec9ffa
- Treasury Secretary Scott Bessent’s FSOC annual report (first under his leadership) shifts priorities toward pro-growth/deregulatory focus, with reduced emphasis on traditional systemic risk regulation. ([politico.com](https://www.politico.com/news/2025/12/11/treasury-bessent-financial-stability-oversight-council-letter-00686574
- UK delays Basel 3.1 implementation to Jan 1, 2027, due in part to uncertainty over U.S. regulatory direction. ([marketwatch.com](https://www.marketwatch.com/story/the-u-k-again-delays-key-banking-rule-saying-it-will-wait-for-u-s-to-decide-first-38440004
- Praxis updates: U.S. agencies have made deregulatory amendments, offering supervisory relief and aligning exam focus toward material risks; Fitch notes modification of enhanced supplementary leverage ratio. ([tradingview.com](https://www.tradingview.com/news/reuters.com%2C2025-12-17%3Anewsml_FIT7yx78x%3A0-fitch-ratings-bank-regulators-hit-key-milestones-in-4q25-deregulation-in-us/
- Regulators are ushering in consumer protection rules around AI by January 2026; global number of AI-related laws jumped from 88 to 157 between mid-2024 and mid-2025. ([thebanker.com](https://www.thebanker.com/content/d3c56ca5-960f-4e96-a863-526c55edd476