Banks lobbied a capital rule to death twice. The third version, they welcomed.

US banking regulators are tightening how much cash banks must hold in reserve against loans and investments that could fail. The change forces banks to recognize losses they previously could defer or hide in accounting categories, making it harder for them to lend aggressively or return capital to shareholders without building larger safety buffers.

For decades, banks have used accounting rules to defer losses on mortgages and other assets, keeping capital ratios artificially high. This proposal closes those loopholes by requiring banks to count accumulated losses immediately, which means less money available for lending and dividends. The real effect: banks shrink their balance sheets or raise capital, which tightens credit availability and raises borrowing costs for businesses and consumers.