Title: Basel III Capital Requirements and Wells Fargo's Future Regulatory Landscape
Wells Fargo's CEO advocates for clarification on capital requirements
In the world of banking, two significant developments are shaping the future for financial institutions, particularly for Wells Fargo.
Firstly, there are ongoing questions about whether regulators will fully release Wells Fargo from the consent orders that have been imposed since 2018. However, the bank's CEO, Charlie Scharf, is seeking "closure" on the issue and expresses confidence in the bank's ability to manage operational risk and compliance better due to these changes.
Secondly, the Basel III capital requirements proposal, first floated in July 2023, is currently in the proposal phase for U.S. banks. If implemented, these rules aim to increase common equity tier 1 capital requirements by approximately 16% to 25%, mainly affecting the largest and most complex banks. The proposed implementation timeline begins in July 2025, with full compliance expected by 2028.
However, it's important to note that the final rule may differ after the extended comment period and stakeholder feedback. There is also ongoing discussion about revising leverage ratio requirements and a broader integrated review of the capital framework for large banks, with openness from regulators to new ideas and a more data-driven approach.
Regarding potential changes after a hypothetical re-election of Donald Trump in 2024, no specific public proposals or regulatory shifts linked directly to Trump's re-election have been documented as of August 2025. The current regulatory approach appears influenced by a deregulatory and pro-innovation policy stance associated with the current administration, aiming for more consultation with industry and more balanced capital requirements.
Wells Fargo is actively preparing for these changes. The bank has submitted a third-party review of changes it's made for the Fed to consider, and it is implementing controls and compliance measures, going through detailed review processes to validate the work before seeking validation from regulators.
Despite the challenges, Wells Fargo is showing signs of recovery. The bank is seeing the start of net checking account growth and debit card point-of-sale volume. The bank's latest enforcement action came in September, related to deficiencies with its anti-money laundering internal controls and financial crimes risk management practices.
In conclusion, the final Basel III capital requirements are in the proposal phase for U.S. banks, with planned implementation from July 2025 to 2028. While the political environment favors some easing and consultation, no direct changes from a Trump re-election are identified yet. Wells Fargo remains under nine consent orders and is actively working towards compliance and recovery.
- In the proposed Basel III capital requirements for U.S. banks, large and complex financial institutions, including Wells Fargo, may face increased common equity tier 1 capital requirements by approximately 16% to 25%.
- As the future regulatory landscape for Wells Fargo evolves, the bank is actively engaging in changes, such as submitting a third-party review of changes it's made for the Fed and implementing controls and compliance measures, in anticipation of the Basel III capital requirements.
