Federal Reserve Governors Michelle Bowman and Christopher Waller pose for a photo, during a break at a conference on monetary policy at Stanford University’s Hoover Institution, in Palo Alto, California, U.S. May 6, 2022. Picture taken May 6, 2022.
Ann Saphir | Reuters
The early departure of the Federal Reserve’s top financial regulator allows for a more industry-friendly official to take his place, the latest boon for U.S. banks riding a wave of post-election optimism.
Federal Reserve Vice Chair for Supervision Michael Barr said Monday that he plans to step down from his role by next month to avoid a protracted legal battle with the Trump administration, which had weighed seeking his removal.
The announcement, a reversal from Barr’s previous comments on the matter, ends his supervisory role roughly 18 months earlier than planned. It also removes a possible impediment to Trump’s deregulatory agenda.
Banks and other financial stocks were among the big winners after the election of Donald Trump in November on speculation that softer regulation and increased deal activity, including mergers, were on the way. Weeks after his victory, Trump selected hedge fund manager Scott Bessent as his nominee for Treasury Secretary.
Trump has yet to name nominees for the three major bank regulatory agencies — the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.
Now, with Barr’s resignation, a more precise image of incoming bank regulation is forming.
Trump is limited to picking one of two Republican Fed governors for vice chair of supervision: Michelle Bowman or Christopher Waller.
Waller declined to comment, while Bowman didn’t immediately respond to request for comment.
Bowman, whose name had already appeared on short lists for possible Trump administration roles and is considered the frontrunner, has been a critic of Barr’s attempt to force American banks to hold more capital — a proposal known as Basel III Endgame.
“The regulatory approach we took failed to consider or deliver a reasonable proposal, one aligned with the original Basel agreement yet suited to the particulars of the U.S. banking system,” Bowman said in a November speech.
Bowman, a former community banker and Kansas bank commissioner, could take on “industry-friendly reforms” around a number of sore spots for banks, according to Alexandra Steinberg Barrage, a former FDIC executive and partner at Troutman Pepper Locke.
That includes what bank executives have called an opaque Fed stress test process, long turnaround times for merger approvals and what bankers have said are sometimes unfair confidential bank exams, Barrage said.
Easier ‘Endgame’?
When it comes to the Basel Endgame, first announced in July 2023 before a toned-down proposal was released last year, it’s now more likely that its ultimate form will be far gentler for the industry, versus versions that would’ve forced large banks to withhold tens of billions of dollars in capital.
Barr led the interagency effort to draft the sweeping Basel Endgame, whose initial version would’ve boosted capital requirements for the world’s largest banks by roughly 19%. Now, Barrage and others see a final version that is far less onerous.
“Barr’s replacement could still work with the other agencies to propose a new B3 Endgame rule, but we think such a proposal would be capital-neutral industry-wide,” Stifel analyst Brian Gardner said Monday in a note. “Bowman voted against the 2023 proposal, and we expect she would lead any B3 re-write in a different direction.”
If lenders ultimately beat back efforts to force them to hold more capital, that would enable them to boost share buybacks, among other possible uses for the money.
Bank stocks traded higher Monday after Barr’s announcement, with the KBW Bank Index rising as much as 2.4% during the session. Citigroup and Morgan Stanley, which have both garnered headlines for regulatory matters last year, were among the day’s biggest gainers, each rising more than 2%.
Notably, Barr is not resigning from his role as one of seven Fed governors, which preserves the current 4-3 advantage of Democrat appointees on the Fed board, according to Klaros Group co-founder Brian Graham.
“Barr’s resignation of the vice chair role, while remaining a governor, is actually very clever,” Graham said. “It preserves the balance of power for board votes for a year or so, and it constrains the choices for his replacement to those currently serving on the board.”
Check out the companies making the biggest moves midday: Petco Health — The retailer slumped 22% after losing 4 cents per share in the fiscal first quarter, twice the 2-cent loss that analysts had estimated, based on FactSet data. Revenue of $1.49 billion missed the Street’s $1.50 billion consensus, while same-store sales dropped 1.3%, worse than the 0.6% decline forecast by analysts. Tesla — The EV maker added more than 6%, a day after plunging 14% as CEO Elon Musk and President Donald Trump publicly feuded . Broadcom — Shares of the chipmaker dipped 2.7% on lackluster free cash flow for the second quarter. Broadcom reported free cash flow of $6.41 billion. Analysts surveyed by FactSet were looking for $6.98 billion. Still, several analysts covering the stock raised their price targets. ABM Industries — Shares fell 11% after the facilities management company reported mixed results for its second quarter. Its adjusted earnings of 86 per share was in line with expectations, while its revenue of $2.11 billion topped the FactSet consensus estimate of $2.06 billion. ABM Industries also reiterated its earnings guidance for the year. Circle Internet Group — The stablecoin company popped 38%, following its Thursday debut on the New York Stock Exchange. Circle soared 168% in its first day of trading . Lululemon — The athleisure company pulled back 20% after its second-quarter outlook missed analyst estimates. CFO Meghan Frank also said on a call that Lululemon plans on taking “strategic price increases, looking item by item across our assortment” to mitigate the impact of higher tariffs. G-III Apparel Group — The apparel company tumbled 15% on much weaker-than-expected earnings guidance for the second quarter. The company sees earnings per share in a range of 2 cents to 12 cents. Analysts had estimated earnings of around 48 cents per share, according to FactSet. DocuSign — The electronic signature stock plunged 19% after the company cut its full-year billings forecast. Billings for the fiscal first quarter also came in lower than expected. Braze — Shares of the customer engagement platforms provider fell 13% on disappointing guidance. Braze guided for second-quarter adjusted earnings of 2 to 3 cents per share. Analysts polled by FactSet called for 9 cents per share. Its first-quarter results beat estimates. Quanex Building Products — The maker of windows and doors and other construction materials soared 18%, the most since September, after earning an adjusted 60 cents per share in its fiscal second quarter versus analysts’ consensus estimate of 47 cents, on revenue of $452 million against the Street’s $439 million, FactSet data showed. Adjusted EBITDA also topped forecasts. Samsara — Shares shed 5% after the software company projected revenue growth to slow. Samsara guided for second-quarter revenue to increase between $371 million and $373 million, up from the $367 million in the first quarter. That would be a slowdown on both a sequential and year-over-year basis. Solaris Energy Infrastructure — The oil and natural gas equipment and service provider rallied 10% after Barclays initiated research coverage with an overweight rating and $42 price target. “Solaris is the leader in distributed power with almost 2 GW of capacity to be added by 2027 with 67% allocated towards data centers on long term contracts,” the bank said.
A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.
Fabrice Coffrini | AFP | Getty Images
The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.
The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.
“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.
The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.
“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.
‘Too big to fail’
UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.
The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.
Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.
At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.
Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.
“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.
“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”
The prospect of stringent Swiss capital rules and UBS’ extensive U.S. presence through its core global wealth management division comes as White House trade tariffs already weigh on the bank’s fortunes. In a dramatic twist, the bank lost its crown as continental Europe’s most valuable lender by market capitalization to Spanish giant Santander in mid-April.
Check out the companies making the biggest moves in premarket trading: Tesla —The EV maker added nearly 5%, a day after plunging 14% as CEO Elon Musk and President Donald Trump publicly feuded . Broadcom — Shares of the chipmaker slipped about 2% before the opening bell, on the heels of lackluster free cash flow in the second quarter. Broadcom reported free cash flow of $6.41 billion, while analysts surveyed by FactSet were looking for $6.98 billion. Broadcom stock has risen more than 12% year to date. Circle Internet Group — The stablecoin company popped nearly 14%, following its debut on the New York Stock Exchange Thursday. Circle soared 168% in its first day of trading . Lululemon — Stock in the athleisure company pulled back nearly 20% after its second-quarter outlook missed analyst estimates. Lululemon forecast earnings per share in the current quarter in the range of $2.85 to $2.90 per share, while analysts polled by LSEG were looking for $3.29. The firm also slashed its earnings outlook for the full year. DocuSign — The electronic signature stock plunged 19%. Despite beating Wall Street expectations on both lines for the first quarter, billings came in lower than anticipated, per FactSet. DocuSign also set current-quarter guidance for billings that was below analysts’ consensus forecast. Braze — Shares of the customer engagement platforms provider fell 6% following the company’s disappointing guidance. Braze guided for second-quarter adjusted earnings between 2 cents and 3 cents per share, while analysts polled by FactSet called for 9 cents per share. Its first-quarter results beat estimates. Samsara — Shares shed 12% after the software company projected revenue growth to slow. Samsara guided for second-quarter revenue to increase between $371 million and $373 million, up from the $367 million in the first quarter. That would be a slowdown on both a sequential and year-over-year basis. Rubrik — The stock gained about 4% following the cloud data management company’s top and bottom line beats for its first quarter. Rubrik lost an adjusted 15 cents per share, narrower than the 32 cent loss expected from analysts polled by FactSet. Revenue was $278.5 million, versus the $260.4 million consensus estimate. —CNBC’s Alex Harring and Brian Evans contributed reporting.
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