US banks are moving into the final stage of discussions or actions around changes to banking capital rules, while the Federal Reserve is still reviewing the policy through its consultation process.

“Capital rule changes” refers to regulations that determine how much capital banks must hold as a safety buffer against losses. 

These rules are important for financial stability because they affect how much risk banks can take and how resilient they are during economic stress

Large U.S. banks on Thursday will formally pitch the central bank on tweaks to a Federal Reserve ​proposal aimed at reducing the funds they must set aside to absorb potential losses, as the central bank enters the last leg of a marathon ‌overhaul of U.S. capital rules.

Among their top asks will be reductions to capital assigned to Wall Street trading activities, scrapping a requirement to hold capital against unused credit card lines, and further fixes to reduce the impact of a surcharge levied on globally interconnected banks, according to five industry executives and employees.

U.S. regulators led by the Federal Reserve in March unveiled new relaxed drafts of sweeping capital rules, which they estimated would reduce big banks' loss-absorbing capital by ​around 4.8%, arguing the current rules are hurting the economy. 

The so-called 'Basel' rules overhaul how banks measure their risk and in turn how much ⁠capital they need.

Direct impact of 'Capital rule changes'

Lenders believe the new proposal is a dramatic improvement from the central bank's original 2023 plan put forward by Democratic officials keen to impose stricter bank rules, ​which had envisaged a 20% capital hike following regional bank failures.

But after analyzing hundreds of pages of proposed technical changes, lenders have identified issues which they will make one last-ditch push to ​fix, the sources said.

The banking industry is also expected to push back against a requirement to effectively hold capital against 10% of unused credit lines known as "unconditionally cancelable commitments," the most common of which is unused credit card lines.

Currently, such credit lines are ​capital-free because banks can yank them at any ​time, but regulators argue that in ⁠practice lenders may not do that during times of economic stress due to client relationships or other risk management practices.

"There's a really big push to get it wrapped up in the next six months because there are other items on the regulatory agenda," said Matthew Bisanz, a partner at Mayer Brown who specializes in financial regulation.

Critics of the easier rules argue that trimming bank capital requirements ​makes the firms more vulnerable to risks, and could hurt the economy should financial firms falter and restrict lending.

Last month, Phillip Basil, director of Economic Growth and Financial Stability ​for Better Markets, said in a press statement "strong capital standards are the foundation" of a resilient banking system, because "they ensure that banks—not taxpayers, workers, or small businesses—absorb losses when risks materialize."

The officials spoke anonymously to discuss ongoing regulatory matters and the contents of comment letters that are not ​yet public whille the deadline for banks to submit formal comments is Thursday.