Chair Powell’s Key Insights: Highlights from the Capital Framework for Large Banks Conference

Good morning! I’m glad to see so much interest in today’s discussion about the capital framework for large banks. This topic is crucial for keeping our banking system safe and efficient.

First, a big thank you to Vice Chair for Supervision Bowman for organizing this event. Her initiative shows how committed we are to understanding and improving our banking system. Today, we’ll hear from experts, including industry veterans, academics, and former policymakers. They will share their insights on the core aspects of the capital framework.

What makes this conference special is how it looks at all parts of the capital framework together. Instead of isolating each component, we want to see how they work together. A solid capital framework consists of risk-based capital requirements, leverage requirements, surcharges for bigger banks, and stress tests. We must ensure these elements fit well, as they are all essential for the safety and soundness of our banking system.

This is particularly important, especially today. Recent studies show that banks have increased their capital reserves significantly since the 2008 financial crisis, creating a more resilient system. According to the Federal Reserve data, large banks had an average common equity tier 1 capital ratio of around 12.5% in 2023, up from about 10% a decade ago. This demonstrates how regulations have strengthened our financial institutions.

Vice Chair Bowman brings valuable experience to her role. Her background as a banker and state supervisor shapes how we tackle supervisory practices. We need to focus on key risk areas to make sure our large banks are well capitalized. This is vital not just for their stability but also for competition. We want these banks to thrive and provide the capital necessary for economic growth.

Moreover, the Fed remains a responsive organization. We’re always open to new ideas and feedback on ways to improve the capital framework. The goal is to create a banking system that benefits everyone. I’m excited to hear from today’s speakers and learn more about their perspectives.

Thank you for joining us! Let’s have a fruitful discussion today.

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