Federal Reserve Aims to Lower Bank Cash Reserves to Spur Lending
Washington, Thursday, 2 April 2026.
Federal Reserve Vice Chair Michelle Bowman outlined plans to reduce bank cash reserves, potentially lowering capital requirements for major banks by 4.8% to revitalize mortgage and business lending.
Recalibrating the Capital Regime
In a series of regulatory updates culminating in her April 1, 2026, congressional testimony, Federal Reserve Vice Chair for Supervision Michelle Bowman outlined a strategic pivot in the central bank’s approach to financial regulation [1]. Arguing that over-calibration of banking rules can stifle economic growth and push lending into less-regulated non-bank sectors, Bowman advocated for a “sensible recalibration” of the U.S. capital regime [3][4]. The proposed adjustments to the Basel III international framework, formally released for public comment in mid-March 2026, are designed to ease the regulatory burdens that have accumulated since the 2008 financial crisis [4][5][6]. According to Federal Reserve Chair Jerome Powell, reexamining these rules is a healthy practice to ensure they efficiently mitigate risks without unnecessarily constraining credit availability [4].