Jason Smith

Subject: Strong Opposition to the Proposed Modernization of the Regulatory Capital Framework – Docket [Insert Relevant Docket ID, e.g., OCC-2026-0265] I am writing as a concerned depositor and citizen to formally oppose the joint proposal issued on March 19, 2026, by the FDIC, OCC, and Federal Reserve to modernize the regulatory capital framework. While I understand the goal of improving risk sensitivity and reducing regulatory burden, the proposal’s estimated reduction in required capital (approximately 3–8% depending on bank size, with up to nearly 7% for smaller banks under the standardized approach) raises serious risks to banking stability and depositor protection. Bank failures, while not daily occurrences, are not as rare as regulators sometimes imply. In 2026 alone, Metropolitan Capital Bank & Trust (Chicago) failed on January 30 with $261 million in assets, costing the Deposit Insurance Fund an estimated $19.7 million. This followed failures in 2025 and the more significant 2023 regional bank collapses (SVB, Signature, and First Republic). These events remind us that even “orderly” resolutions carry costs and potential for broader stress. Lowering capital buffers means banks would hold a thinner cushion against losses from loans, interest rate changes, commercial real estate exposure, or sudden deposit outflows. This directly increases the chance — even if incremental — of more frequent or more severe bank stresses in the future. In a downturn or liquidity crunch, thinner buffers could lead to: • Greater reliance on the FDIC’s Deposit Insurance Fund (currently at a reserve ratio of about 1.42%, with a long-term target of 2.00%). • Higher assessments on all banks, which are ultimately passed on to customers through fees or lower interest rates. • Increased potential for losses on uninsured deposits (amounts over $250,000), or the need for systemic risk exceptions that strain the broader system. While insured deposits up to $250,000 per depositor, per ownership category, per bank would still receive priority protection, history shows that weaker capital standards can amplify systemic risks and contagion. The 2008 crisis demonstrated the dangers of insufficient buffers. Reversing elements of the stricter post-crisis rules — even if framed as “rightsizing” — risks repeating past mistakes by prioritizing lending growth over resilience. I urge the agencies to: • Retain stronger, more conservative capital requirements rather than implementing these reductions. • Conduct a more thorough analysis of how the proposed changes could affect failure rates and DIF costs, especially given the recent 2026 bank failure. • Prioritize depositor safety and long-term financial stability over short-term regulatory relief or increased lending capacity. • Consider maintaining or enhancing buffers in light of ongoing economic uncertainties (interest rates, commercial real estate, etc.). Public confidence in the banking system depends on erring on the side of caution with capital rules. Weakening them now could undermine the very protections that have kept insured depositors safe since 1933. Thank you for considering these comments. I respectfully request that the agencies withdraw or significantly strengthen the proposal to better protect customers and the financial system. Sincerely, Jason Smith