A changing of the guard at a key US Federal Reserve function has opened the door for a US$200+ bln relief from their 'tight' bank capital rules for the largest, globally important banks who are US based

After years of resisting the pressure from Wall Street's biggest banks, the ones who are globally systemically important, the Fed looks like it is about to cave.

The Fed has long wanted these banks to hold sufficiently "more capital" as a backstop against economic shocks that could see one of them waver and require a public bailout - and in their case a very expensive public bailout.

One key technique the Fed uses is a capital rule that requires these banks, via the "enhanced supplementary leverage ratio" - to hold capital equal to 6% of their assets, 5% for their senior holding companies. That has been the definition of "well capitalised" in the American context.

But the political landscape has changed in Washington. These banks threw their weight behind a change of Administration, and the reward is about to be delivered.

The capital requirements for these global systemic banks is about to be reduced to 3.5%. - or in the language of the rule change, a range of 3.5% to 4.5%. The definition of "well capitalised" is being shifted to 3% for the largest American banks.

That means there will be US$210 bln less capital in these banks. At existing profit levels, the return on equity for them is about to be greatly enhanced

The change has been actioned by the Trump Administration getting rid of Governor Michael Barr, a staunch opponent of the rule change, and replacing him with Michelle Bowman, as Trump’s pick to be the central bank’s new "vice chair for supervision". She had previously been a Trump pick as a Fed governor, winning Senate confirmation in the original 64-34 vote. But for the recent upgrade to "vice chair for supervision" the Senate vote was 48-46 reflecting much broader concerns over what she has been tasked to do.

The coming rule change also allows these big banks to extend their role as market-makers for trading in US Treasuries.

Here is the rule change. The Fed vote to adopt it was 5-2.

The big banks who will benefit from it are the eight American banks in this list.