<p>As regulators who support the Trump administration start to look at rules that were put in place during President Biden&#39;s time, U.S. banks are getting ready for what they say is a likely triumph in their long-running fight over future capital requirements. &nbsp;Senior leaders at several of the biggest banks and financial firms indicate that talks in Washington have changed a lot in the past few weeks. This has raised hopes that the final version of the &quot;Basel III endgame&quot; framework would be a lot less strict.</p>

<p>&nbsp;Bank chiefs had said that the initial plan, which called for bigger capital buffers to keep the economy stable in case of shocks, was too much and not well-suited for the U.S. financial system. &nbsp;They said that the requirements would make it harder to get loans, limit the amount of credit available, and put American banks at a disadvantage in the worldwide market. &nbsp;Several industry groups worked together to lobby, saying that the costs of compliance would eventually be passed on to consumers and businesses.</p>

<p>&nbsp;People who know about negotiations between regulators believe that Trump-appointed officials are shaping the new review process. These officials are more open to the banking sector&#39;s arguments, especially those that stress economic growth and market liquidity. &nbsp;One executive, who asked to remain anonymous since the talks are confidential, said that the tone of the discussions has changed from &quot;defensive technical debate&quot; to &quot;practical adjustments and outcomes.&quot;</p>

<p>&nbsp;The executive said, &quot;This time feels different.&quot; &nbsp;&quot;People are more willing to think about how banks really work in the real world, not just in theory.&quot;</p>

<p>&nbsp;The Federal Reserve and the Office of the Comptroller of the Currency have not said anything publicly, but many people think that officials will put off or change some parts of the rule package. &nbsp;Some of the things that are being looked at right now are the computation of risk-weighted assets, trading-book capital charges, and operational-risk add-ons that banks say made losses look worse than they really were.</p>

<p>&nbsp;People who support the original proposal say that lowering capital limits might make the banking sector unstable again. &nbsp;They cite the failures of regional banks in 2023 and say that the U.S. is still at risk of liquidity shocks, especially when interest rates change quickly.</p>

<p>&nbsp;However, supporters of recalibration say that banks today have a lot more capital than they did before the 2008 financial crisis, and that sudden increases in capital requirements could have unintended effects, like pushing lending and credit creation into areas that are less regulated.</p>

<p>&nbsp;This argument has quietly turned into one of the most important policy fights in Washington&#39;s financial world. &nbsp;Even if it doesn&#39;t get as much attention from the public as consumer banking or corporate tax policy, the outcome will have an effect on the cost of borrowing, the way banks keep their books, and the way markets compete in areas like mortgages and derivatives.</p>

<p>&nbsp;For now, banks are hopeful. &nbsp;Several CEOs have advised board members and large shareholders that the rules and regulations in the coming year might be better than they thought they would be. &nbsp;Some businesses are now looking at strategic commitments that had been put on hold, such as possible growth in trading, structured finance, and private credit partnerships.</p>

<p>&nbsp;There is still some doubt. &nbsp;Even if the new laws are put into effect, they will probably encounter legal and political problems, especially if the government changes again or if watchdog groups try to stop them. &nbsp;In the next few months, we&#39;ll see if changes to the rules on paper really do make things more flexible in practice.</p>

<p>&nbsp;The stakes are clear for the banking industry: reduced capital requirements give them more room to lend, invest, and compete. &nbsp;The challenge for regulators and those who want additional monitoring is whether a banking system that isn&#39;t as heavily taxed can stay strong in unanticipated situations.</p>

<p>&nbsp;The argument isn&#39;t over yet, but U.S. banks think they have the upper hand for the first time in two years.</p>