The largest banks in America spent Thursday making a formal case to federal regulators that they should be allowed to hold even less money in reserve against potential losses. The Federal Reserve's consultation window closed at midnight, and Wall Street used its last hours to argue that the proposed rules still go too far.

This is the final act of a years-long fight over something called "Basel Endgame," a global framework that determines how much cushion banks must maintain against bad bets, failed loans, and market shocks. In plain terms: when things go wrong, banks need a buffer so they can absorb losses without collapsing and taking the broader economy with them. The question is how big that buffer needs to be.

How the rules changed, and why banks still want more

The Fed's current proposal, released in March, would reduce big banks' required capital by around 4.8% compared to existing levels. That was already a dramatic climb-down from a 2023 plan put forward under Democratic leadership that would have raised capital requirements by 20%, following a wave of regional bank failures. Banks called that version punishing. They mostly welcome the new version but say it still has rough edges.

Their specific asks, according to five industry executives who spoke to Reuters, include three main targets. First, they want lower capital requirements tied to trading activity, arguing the Fed's annual stress tests already capture those risks adequately. Second, they want to eliminate a rule that would require banks to hold capital against 10% of unused credit card lines, credit that banks can technically cancel at any time. Third, the largest globally connected banks want relief from a surcharge originally designed after the 2008 financial crisis, arguing the calculation should account for economic growth dating back to 2015 rather than 2019.

The banks' position is that trimming these requirements would free up liquidity and support Treasury markets, the bedrock of global finance. Three major financial trade groups made that case in a letter to the Fed, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, according to the Financial Times.

Who wins and who takes on the risk

Critics do not find that argument persuasive. Phillip Basil, director of Economic Growth and Financial Stability at the advocacy group Better Markets, put the counter-case bluntly last month: "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."

That framing matters. Capital requirements are not an abstract regulatory preference. They are the mechanism that determines who bears the cost when a large financial institution runs into serious trouble. Higher requirements mean the bank's own shareholders and bondholders absorb the hit. Lower requirements shift the exposure toward the broader public, through bailouts, credit contractions, or economic damage from a crippled lending system.

The credit card provision is worth pausing on. Regulators want banks to hold capital against unused credit card lines because, in practice, lenders rarely cancel those lines during a downturn, even though they technically can. The banks say they should get credit for that theoretical flexibility. Regulators say the real-world behavior is what matters. Both sides are right about the facts and disagree about which facts should count.

The urgency behind Thursday's deadline is real. Matthew Bisanz, a financial regulation partner at law firm Mayer Brown, told Reuters that there is "a really big push to get it wrapped up in the next six months because there are other items on the regulatory agenda." That suggests a final rule could arrive before the end of 2026.

Banks are not fighting this one as aggressively as they fought the 2023 version. They have narrowed their asks and focused on the details most likely to move. The outcome will be somewhere in a range that most of Wall Street can live with. The question the public probably should be asking is whether the range being negotiated is the right one.