Economy

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.The shadow over Asian markets cast by China’s economic malaise continues to darken, but chinks of light are beginning to appear – ‘peak Fed’ is drawing closer, U.S. bond yields may be topping out, and the dollar is its weakest in three weeks.These dynamics could intensify later this week if U.S. inflation data for June undershoots analysts’ already soft expectations. All else equal, this would be a tailwind for Asian stocks, bonds and currencies.Several Fed officials on Monday said interest rates will have to rise further to contain inflation, but the end of the tightening cycle is in sight. A New York Fed survey of consumer and inflation expectations was also “risk-friendly.” There are no major economic, policy or corporate events on the Asian calendar on Tuesday, leaving investors to take their cue again from the outlook for U.S. rates, and Chinese growth and stimulus.Sentiment toward Asian stocks in recent months has been mostly bearish, with the exception of Japan, but a pause in the selling on Monday lifted the gloom a little. Chinese and broader Asian stocks rose for the first time in four sessions, while the yuan and yen strengthened to two-week highs against the dollar. The dollar’s slide will cool speculation that Japanese authorities are poised to intervene to support the yen, and a steadier yuan will halt the spiral of a weakening currency, capital outflows and pressure on the central bank to intervene.But China’s latest inflation figures on Monday were sobering. Annual consumer price inflation in June was zero and producer price inflation slumped to -5.4%, signaling the heaviest deflation since 2015. Both readings undershot economists’ expectations, triggering another slide in Citi’s Chinese economic surprises index to a two-year low. The index has risen just four out of the last 60 trading sessions and is down 11 weeks in a row, its longest stretch of underperformance since 2010.Chinese bank stocks, measured by the Hong Kong-listed Hang Seng Mainland Banks Index, fell for a fifth day on Monday, but a potentially significant turnaround in the tech sector helped boost broader equity sentiment.Analysts reckon China’s near $1 billion fine slapped on Ant Group could draw a line under the fintech giant’s woes, giving hope to investors that a regulatory crackdown on China’s broader technology sector is over.The regional economic data calendar is light on Tuesday, with only Australian consumer confidence and business sentiment, and Philippines trade figures on tap.Here are key developments that could provide more direction to markets on Tuesday:- Australia consumer confidence (July)- Australia business confidence (June)- Germany inflation (June, final) (By Jamie McGeever; Editing by Marguerita Choy) More

Good morning. Turkey’s president Recep Tayyip Erdoğan has agreed to support Sweden’s membership of Nato, the military alliance has said on the eve of its annual leaders’ summit in Lithuania. The move paves the way for the Nordic country to join the US-led bloc after more than a year of opposition from Ankara.Erdoğan’s decision to lift his veto, after a last-ditch meeting with the leaders of Sweden and Nato on Monday evening, came after Turkey’s president linked his support for Stockholm’s accession to Turkey’s long-stalled EU bid. The lifting of Erdoğan’s block opens the way for Turkey’s parliament to approve Sweden’s entry into the military alliance, a step seen as critical to increasing the defence of eastern Europe in response to Russia’s invasion of Ukraine.Turkey’s president agreed to “forward the accession protocol for Sweden [to join Nato] to the Grand National Assembly as soon as possible and work closely with the assembly to ensure ratification,” Nato secretary-general Jens Stoltenberg said after hours of negotiations with the leaders of Turkey and Sweden. Stoltenberg described the decision as a “clear commitment” from Turkey’s president, but said it was “not for me to go into the details of the timelines of the different political institutions in Turkey”, when asked how soon Sweden could become a member of Nato.Go deeper: The unity of Nato’s 31 members will be put to its biggest test since the beginning of the Ukraine war at this week’s summit, writes Gideon Rachman.Here’s what else I’m keeping tabs on today:Economic data: July unemployment figures are due in the UK, while Germany reports the final June consumer price index and harmonised index of consumer prices, plus the ZEW economic sentiment survey. Asean meeting: Foreign ministers from south-east Asian countries will meet in Jakarta, Indonesia to discuss the crisis in Myanmar, tensions in the South China Sea and other regional issues. (Associated Press)Heat and flooding in China: Parts of eastern and south-west China are preparing for torrential rain, while employers across much of the country on Monday were ordered to limit outdoor work because of brutal heat. (Associated Press)Five more top stories1. Russian president Vladimir Putin met Yevgeny Prigozhin and other Wagner commanders a few days after their aborted mutiny, the Kremlin has revealed. The revelation is a further sign that Moscow is in no hurry to punish Prigozhin, who Putin had initially branded “a traitor”. 2. A top US banking regulator has announced tougher capital rules for a broader range of lenders in an effort to shore up a financial system rattled by the failure of several regional banks earlier this year. Here are more details on the regulatory changes for larger lenders.More US banks news: The largest US banks are this week set to report the biggest jump in loan losses since the onset of the coronavirus pandemic, as rising interest rates pile mounting pressure on borrowers across the economy.3. A growing number of countries are bringing their physical gold reserves back home to avoid Russian-style sanctions on their foreign assets, while increasing their purchases of the precious metal as a hedge against high levels of inflation. Read more on the global demand for gold. 4. The asset management industry faces dramatic consolidation over the next four years as one in six companies could disappear because of a mix of market volatility, high interest rates and pressure on fees. Read more on the findings from PwC’s survey of 500 asset managers and institutional investors. More asset management news: Big money managers in China have cut fees on thousands of mutual fund products, in a swift reaction to government pressure to reduce rates across the country’s fast-evolving financial services sector.5. A Singapore hedge fund has filed a petition in Hong Kong to wind up defaulted developer Kaisa, marking one of the first cases dealing with a Chinese developer’s mainland debt following a property sector meltdown in the country. Analysts say the case reflects creditors’ impatience with restructuring in China’s property sector. The Big Read

Volodymyr Zelenskyy, left, and Jens Stoltenberg © FT Montage/Reuters/Getty

As his battered troops continue to fight off a relentless invasion and attempt to claw back occupied territory in Ukraine’s south and east, Volodymyr Zelenskyy will this Wednesday be in Lithuania’s capital, Vilnius, with another strategic objective: to gain a seat at Nato’s table. But his bid poses difficult questions for the military alliance’s 31 members, from how prepared they are to fight Russia, to whether its mutual-defence clause needs to be earned before it is given.We’re also reading and watching . . . Endangered analysts: Two decades of scandals, complaints about overly rosy ratings and regulatory tinkering have imperilled the once-rock star equity analyst, writes Brooke Masters.China’s youth unemployment crisis: Beijing’s crackdown on tech and slow post-Covid growth have left a generation of graduates with fewer options. FT film 🎬: Gautam Adani saw more than $100bn wiped from his listed companies’ valuation after a short seller took aim at his empire. Now, the fallout has spread beyond the markets into Indian politics.Chart of the day

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

China’s economy teetered on the brink of deflation in June, adding to calls for Beijing to launch a stronger stimulus package to sustain the country’s sputtering post-Covid recovery. The consumer price index was flat year on year and declined 0.2 per cent compared with the previous month, while factory gate prices fell at the fastest pace since 2016. Take a break from the newsFeeling worn out? Take a nap. Employers are waking up to the advantages of snoozing on the job, as groups from law firms to banks seek help for the overworked.

A short snooze isn’t a sign of idleness or moral decay. Framing a nap as fecklessness makes it more appealing © General Photographic Agency/Getty Images

Additional contributions by Tee Zhuo and Gordon Smith More

A split over the stewardship of the union’s high-profile president, Christian Smalls, has led a rival faction to file a lawsuit seeking an election.A dissident group within the Amazon Labor Union, the only certified union in the country representing Amazon employees, filed a complaint in federal court Monday seeking to force the union to hold a leadership election.The union won an election at a Staten Island warehouse with more than 8,000 employees in April 2022, but Amazon has challenged the result and has yet to begin bargaining on a contract.The rise of the dissident group, which calls itself the A.L.U. Democratic Reform Caucus and includes a co-founder and former treasurer of the union, reflects a growing split within the union that appears to have undermined its ability to pressure Amazon. The split has also threatened to sap the broader labor movement of the momentum generated by last year’s high-profile victory.In its complaint, the reform caucus argues that the union and its president, Christian Smalls, illegally “refuse to hold officer elections which should have been scheduled no later than March 2023.”The complaint asks a federal judge to schedule an election of the union’s top officers for no later than Aug. 30 and to appoint a neutral monitor to oversee the election.Mr. Smalls said in a text message Monday that the complaint was “a ridiculous claim with zero facts or merit,” and a law firm representing the union said it would seek legal sanctions against the reform group’s lawyer if the complaint was filed.The complaint states that under an earlier version of the union’s constitution, a leadership election was required within 60 days of the National Labor Relations Board’s certification of its victory.But in December, the month before the labor board certification, the union’s leadership presented a new constitution to the membership that scheduled elections after the union ratifies a contract with Amazon — an accomplishment that could take years, if it happens at all.On Friday, the reform caucus sent the union’s leadership a letter laying out its proposal to hold prompt elections, saying it would go to court Monday if the leadership didn’t embrace the proposal.The reform group is made of up more than 40 active organizers who are also plaintiffs in the legal complaint, including Connor Spence, a union co-founder and former treasurer; Brett Daniels, the union’s former organizing director; and Brima Sylla, a prominent organizer at the Staten Island warehouse.The group said in its letter that enacting the proposal could “mean the difference between an A.L.U. which is strong, effective, and a beacon of democracy in the labor movement” and “an A.L.U. which, in the end, became exactly what Amazon warned workers it would become: a business that takes away the workers’ voices.”Mr. Smalls said in his text that the union leadership had worked closely with its law firm to ensure that its actions were legal, as well as with the U.S. Labor Department.Jeanne Mirer, a lawyer for the union, wrote to a lawyer for the reform caucus that the lawsuit was frivolous and based on falsehoods. She said that Mr. Spence had “improperly and unilaterally” replaced the union’s founding constitution with a revised version in June 2022, and that the revision, which called for elections after certification, had never been formally adopted by the union’s board.Retu Singla, another lawyer for the union, said in an interview that the constitution was never made final because there were disagreements about it within the union’s leadership.Mr. Spence said he and other members of the union’s board had revised the constitution while consulting extensively with the union’s lawyers. A second union official involved in the discussions corroborated his account.The split within the union dates from last fall, when several longtime Amazon Labor Union organizers became frustrated with Mr. Smalls after a lopsided loss in a union election at an Amazon warehouse near Albany, N.Y.In a meeting shortly after the election, organizers argued that control of the union rested in too few hands and that the leadership should be elected, giving rank-and-file workers more input.The skeptics also complained that Mr. Smalls was committing the union to elections without a plan for how to win them, and that the union needed a better process for determining which organizing efforts to support. Many organizers worried that Mr. Smalls spent too much time traveling the country to make public appearances rather than focus on the contract fight on Staten Island.Mr. Smalls later said in an interview that his travel was necessary to help raise money for the union and that the critics’ preferred approach — building up worker support for a potential strike that could bring Amazon to the bargaining table — was counterproductive because it could alarm workers who feared losing their livelihoods.He said a worker-led movement shouldn’t turn its back on workers at other warehouses if they sought to unionize. A top union official hired by Mr. Smalls also argued that holding an election before the union had a more systematic way of reaching out to workers would be undemocratic because only the most committed activists would vote.When Mr. Smalls unveiled the new union constitution in December, scheduling elections after a contract was ratified, many of the skeptics walked out. The two factions have operated independently this year, with both sides holding regular meetings with members.In April, the reform caucus began circulating a petition among workers at the Staten Island warehouse calling on the leadership to amend the constitution and hold prompt elections. The petition has been signed by hundreds of workers at the facility.The petition soon became a point of tension with Mr. Smalls. In an exchange with a member of the reform caucus on WhatsApp in early May, copies of which are included in Monday’s legal complaint, Mr. Smalls said the union would “take legal action against you” if the caucus did not abandon the petition.The tensions appeared to ease later that month after the union leadership under Mr. Smalls proposed that the two sides enter mediation. The reform caucus accepted the invitation and suspended the petition campaign.But according to a memo that the mediator, Bill Fletcher Jr., sent both sides on June 29 and that was viewed by The New York Times, the union leadership backed out of the mediation process on June 18 without explanation.“I am concerned that the apparent turmoil within the ALU E. Board means that little is being done to organize the workers and prepare for the battle with Amazon,” Mr. Fletcher wrote in the memo, referring to the union’s executive board. “This situation seriously weakens support among the workers.”Colin Moynihan More

(Reuters) -The Federal Reserve will likely need to raise interest rates further to bring down inflation that is still too high, but the end to its current monetary policy tightening cycle is getting close, several U.S. central bank officials said on Monday.The Fed has raised interest rates by 5 percentage points since March 2022 to bring down the highest U.S. inflation in four decades. Fed policymakers opted last month to forego a rate increase to give themselves time to assess the still-developing effects of the previous hikes in borrowing costs, even as most also penciled in at least two more increases by the end of 2023.”We’re likely to need a couple more rate hikes over the course of this year to really bring inflation” sustainably back to the U.S. central bank’s 2% goal, San Francisco Fed President Mary Daly said during an event at the Brookings Institution, giving voice to the most common view among her rate-setting peers at the Fed.But, Daly added, while the risks of doing too little are still greater than those of overdoing it on rate hikes, the two sides are getting into better balance as the Fed nears “the last part” of its hiking cycle. Daly said she fully supported June’s policy decision, along with a go-slower approach that allows for more “extreme” data-dependence. “We may end up doing less because we need to do less; we may end up doing just that; we could end up doing more. The data will tell us.”Fed policymakers are widely expected to deliver a rate hike at their meeting later this month, a move that would bring the policy rate to the 5.25%-5.50% range. What’s less clear is whether they will raise rates again at the September meeting, wait until November, or just stay on hold and let inflation ease over time. Fed Chair Jerome Powell has said he cannot rule out consecutive rate hikes to deal with stubbornly high inflation, which by the central bank’s preferred gauge, the personal consumption expenditures index, has fallen from a peak of 7% last year to 3.8% in May, still nearly twice the Fed’s target. “We still have a bit of work to do,” Fed Vice Chair for Supervision Michael Barr said on Monday at a separate event. “I’ll just say for myself, I think we’re close.”NEAR-TERM INFLATION EXPECTATIONS FALLA survey released on Monday by the New York Fed on the state of consumer expectations in June showed near-term inflation expectations dropped to their lowest level since April 2021. That could buttress the case that price pressures are weakening, which in turn could take some pressure off the central bank to hike rates again. But the survey also showed a fifth straight month of expected home price gains, suggesting that housing inflation could again become an issue for the Fed at some point.Atlanta Fed President Raphael Bostic, speaking at yet another event on Monday, repeated his view that the Fed can be “patient” on rates and allow restrictive policy to bring down inflation without further action by the central bank. But within the Fed there remains a camp that feels just the opposite.Commenting on last month’s policy meeting, Cleveland Fed President Loretta Mester told reporters, “if it was just me alone, I would have moved the rates up, but I understood the rationale for not moving in June,” given the importance of matching market expectations. Mester, who does not have a vote on the Fed’s policy-setting committee this year, reaffirmed her view that interest rates will need to rise but was not yet ready to say that should happen at the July 25-26 meeting, as more data on the economy is inbound. Mester also said her outlook for rates is in line with or slightly above the Fed consensus of half a percentage point more of additional tightening before the end of the year.Mester, however, said higher rates will be needed because “the economy has shown more underlying strength than anticipated earlier this year, and inflation has remained stubbornly high, with progress on core inflation stalling.” More

WASHINGTON (Reuters) – The Federal Reserve’s top regulatory official laid out a sweeping plan to increase capital requirements for the nation’s largest banks in the wake of recent bank failures, a move that was immediately met with criticism from the industry. In a widely-anticipated speech, Fed Vice Chair for Supervision Michael Barr said he planned to pursue multiple regulatory initiatives that would direct larger banks with more than $100 billion in assets to hold more in reserve, saying the recent bank failures underlined the need for regulators to bolster resilience in the system.”Events over the past few months have only reinforced the need for humility and skepticism, and for an approach that makes banks resilient to both familiar and unanticipated risks,” Barr said in a speech at the Bipartisan Policy Center in Washington. Barr had been expected to prescribe tighter rules on the sector since being tapped by President Joe Biden to serve as the Fed’s bank watchdog. But Monday’s remarks marked the most detailed view yet of his agenda, and confirmed industry fears he would pursue a broad set of tighter requirements and also ignore their pleas for relief in some areas.The banking industry called the effort misguided and could hinder lending.”The changes he outlined today fail to adequately consider the negative repercussions from forcing banks of all sizes to hold more capital than is needed to maintain safety and soundness. Higher capital requirements come at a cost to the economy, and regulators have other existing regulatory tools to manage risks,” said Rob Nichols, president and CEO of the American Bankers Association. The nation’s largest bank lobby said it would oppose any proposals it deemed unnecessary and economically harmful.Barr said he did not plan to overhaul the U.S. bank capital framework, but instead build on it in several ways, including by fully implementing the globally agreed Basel bank capital agreement and expanding annual “stress tests” of banks’ health. He did not offer a specific timeline for any changes, but the effort is expected to kick off in the coming weeks.’HOLISTIC REVIEW’Barr’s speech served as a comprehensive update on a “holistic” review of bank capital rules that he launched shortly after joining the U.S. central bank in 2022. He had already indicated at the time that he was considering where rules might be strengthened, but now argues the banking crisis in March and April, which saw the failure of Silicon Valley Bank (SVB) and two other lenders, underlined the need to do more.”The holistic review began well before then, of course, and the steps proposed here address shortcomings in capital standards that did not begin in March of 2023,” he said. “But in an obvious way, the failures of SVB and other banks this spring were a warning that banks need to be more resilient.” Specifically, Barr said the crisis proved the systemic role smaller banks can play, which means they also should face stricter oversight. He said he will seek to apply stricter capital rules to banks with more than $100 billion in assets, expanding the pool of firms that must comply.The banks which would qualify, according to Fed data, include Citizens Financial (NYSE:CFG) Group, Fifth Third, Huntington and Regions. The banks did not immediately respond to requests for comment. The stock prices of the first three firms were down at least 0.3% in midday trading Monday, while Regions was up 0.3%.Dashing industry hopes for any rules relief, Barr also said he did not plan to weaken an existing surcharge on large global banks or leverage rules which the industry argued hampered Treasury market functions. Barr said evidence of that is “inconclusive,” and any impact should be reduced when a fuller set of rules in is place.However, Barr did emphasize that any new requirements would go through a formal rule-writing and public comment process, and include lengthy transition periods to allow banks to raise necessary capital.He said that most banks already have enough capital to meet the new standards he has envisioned, but firms that must raise capital would be able to do so in less than two years of retained earnings, while maintaining their investor dividends.The Fed has itself come under criticism for its oversight of banks involved in this year’s banking crisis. The Republican-led U.S. House of Representatives Oversight Committee on Monday asked Fed Chair Jerome Powell to hand over confidential documents related to the U.S. central bank’s supervision of failed Silicon Valley Bank. Barr also said on Monday the Fed is close to reaching the appropriate level of interest rates to bring inflation back to its 2% target but “we still have a bit of work to do.” More

LONDON (Reuters) – Britain’s government and the Bank of England “will do what is necessary, for as long as necessary” to return inflation to its 2% target, finance minister Jeremy Hunt said on Monday, adding to signs that interest rates will stay high for some time.”Delivering sound money is our number one focus,” Hunt told finance executives at the City of London’s annual Mansion House dinner, in a speech alongside BoE Governor Andrew Bailey, who said he would “see the job through” on bringing down inflation.British inflation hit a 41-year high of 11.1% in October and has been slower to fall than in other big economies. Last month the BoE unexpectedly raised its key interest rate by half a percentage point to 5%, after inflation held at 8.7% in May.Since then, Bailey has suggested that the BoE may have to hold rates at their peak for some time, although he has given little indication of how high that will be. Markets see rates reaching 6.25% or 6.5% late this year or early in 2024.Prime Minister Rishi Sunak promised in January to halve inflation this year, a goal which now looks challenging. “Working with the Governor and the Bank of England, we will do what is necessary for as long as necessary to tackle inflation persistence and bring it back to the 2% target,” Hunt said at the start of a speech which focused largely on changes to Britain’s pension sector.The finance minister added that businesses should show restraint on profit margins, saying “margin recovery benefits no one if it feeds inflation”.Hunt reiterated that the fight against inflation would have to take priority over the tax cuts which many lawmakers in his Conservative Party want to boost their ailing political fortunes ahead of a national election expected next year.Public-sector workers are also likely to be disappointed by pay rises the government is due to announce later this month.Reducing inflation “means taking responsible decisions on public finances, including public sector pay, because more borrowing is itself inflationary”, Hunt said, sticking close to previous statements.Trade unions dispute how inflationary public-sector pay rises would be, as higher costs for public services do not feed directly into consumer price inflation, and the government has the option of raising taxes to fund them. More

Bank of England governor Andrew Bailey and chancellor Jeremy Hunt joined forces on Monday to call for wage restraint, as they told a City of London audience that high pay settlements were hitting the fight against inflation.Bailey said at the annual Mansion House dinner that the “unexpected resilience” of Britain’s economy had exacerbated wage and demand pressures, contributing to “sticky” high inflation.Meanwhile, Hunt said he and Bailey would do “what is necessary for as long as necessary to tackle inflation” and return it to the central bank’s 2 per cent target.The chancellor told the Mansion House audience: “That means taking responsible decisions on public finances, including public sector pay, because more borrowing is itself inflationary.”Rishi Sunak, the prime minister, and Hunt must decide this month whether to back pay rises of about 6 per cent for public sector workers — the average expected to be recommended by independent review bodies for 2023-24.Hunt told the Financial Times last week that any such pay awards could not be funded by more government borrowing, suggesting savings would have to be found from existing Whitehall budgets.“We will not resolve these public sector pay disputes with any measures that are inflationary,” he said.Bailey told City figures that the UK economy had shown unexpected resilience in the face of inflationary shocks unleashed by the Covid pandemic and Russia’s invasion of Ukraine, noting that the unemployment rate stands at 3.8 per cent.He went on to say that nobody wanted “to see unemployment higher or growth weaker” but added: “Both price and wage increases at current levels are not consistent with the inflation target.”Consumer price inflation currently stands at 8.7 per cent. Annual private sector wage growth increased to 7.6 per cent in the three months to April, according to the latest official data.Financial markets expect the BoE to continue to raise interest rates beyond the current level of 5 per cent.Bailey said he expects UK headline inflation to “fall markedly over the rest of the year” due to lower energy prices. “Food prices should fall, too, as lower commodity prices feed through to prices in the shops,” he added.The chancellor’s tough line on inflation was intended to address short-term problems facing the economy, but he also set out a series of “Mansion House reforms” to try to improve long-term growth.These include changes to regulations with a view to persuading pension funds to put more of their money into “productive assets”, notably early-stage companies.Hunt hailed a voluntary compact by leading companies to put 5 per cent of their assets from defined contribution pension schemes into unlisted businesses — potentially unlocking up to £50bn of investment for high-growth companies by 2030.Hunt said he was prepared to require smaller pension funds to merge, to improve their efficiency and help them invest in assets which would yield a higher return for savers.He also outlined proposals to overhaul stock market listing rules to try and make the City a more attractive venue, and the package of reforms received a generally favourable welcome.But Matthew Beesley, chief executive of Jupiter Asset Management, sounded a note of caution, saying: “As active managers our job is to funnel capital to parts of the market that we believe are inefficiently priced — at times that will include growth assets and private assets, and at times it might not.”Beesley said a lack of growth capital in the UK was not the only issue. “The bigger issue is the lack of stability in the UK over the last 10 years. The fear of what was unknown prior to Brexit . . . and even now, because we’re in an interregnum between governments, those that have been cautious in wanting to commit capital to the UK might possibly stay cautious for the next year or so.”The Treasury’s statement that more “effective investments” by defined contribution schemes will increase savers’ pension pots “by up to 12 per cent, or as much as £16,000 for an average earner” was also queried. “It is unwise, to put it mildly, for the government to use past performance data in a press statement to justify these reforms which could actually reduce value for savers,” said Mick McAteer, co-director of the Financial Inclusion Centre think-tank and a former board member of the Financial Conduct Authority, the UK regulator.  More

In a series of changes that has bank lobbyists on the defensive, Michael Barr is calling for higher bank capital and tougher annual stress tests.Michael S. Barr, the Federal Reserve’s vice chair for supervision, announced on Monday that he would be pushing for significant changes to how America’s largest banks were overseen in a bid to make them more resilient in times of trouble — partly by ratcheting up how much capital they have to get them through a rough patch.The overhaul would require the largest banks to increase their holdings of capital — cash and other readily available assets that could be used to absorb losses in times of trouble. Mr. Barr predicted that his tweaks, if put into effect, would be “equivalent to requiring the largest banks hold an additional two percentage points of capital.”“The beauty of capital is that it doesn’t care about the source of the loss,” Mr. Barr said in his speech previewing the proposed changes. “Whatever the vulnerability or the shock, capital is able to help absorb the resulting loss.”Mr. Barr’s proposals are not a done deal: They would need to make it through a notice-and-comment period — giving banks, lawmakers and other interested parties a chance to voice their views. If the Fed Board votes to institute them, the transition will take time. But the sweeping set of changes that he set out meaningfully tweak how banks both police their own risks and are overseen by government regulators.“It’s definitely meaty,” said Ian Katz, an analyst at Capital Alpha who covers banking regulation.The Fed’s vice chair for supervision, who was nominated by President Biden, has spent months reviewing capital rules for America’s largest banks, and his results have been hotly anticipated: Bank lobbyists have for months been warning about the changes he might propose. Midsize banks in particular have been outspoken, saying that any increase in regulatory requirements would be costly for them, reining in their ability to lend.Monday’s speech made clear why banks have been worried. Mr. Barr wants to update capital requirements based on bank risk “to better reflect credit, trading and operational risk,” he said in his remarks, delivered at the Bipartisan Policy Center in Washington.For instance, banks would no longer be able to rely on internal models to estimate some types of credit risk — the chance of losses on loans — or for particularly tough-to-predict market risks. Beyond that, banks would be required to model risks for individual trading desks for particular asset classes, instead of at the firm level.“These changes would raise market risk capital requirements by correcting for gaps in the current rules,” Mr. Barr said.Perhaps anticipating more bank pushback, Mr. Barr also listed existing rules that he did not plan to tighten, among them special capital requirements that apply only to the very largest banks.The new proposal would also try to address vulnerabilities laid bare early this year when a series of major banks collapsed.One factor that led to the demise of Silicon Valley Bank — and sent a shock wave across the midsize banking sector — was that the bank was sitting on a pile of unrealized losses on securities classified as “available for sale.”The lender had not been required to count those paper losses when it was calculating how much capital it needed to weather a tough period. And when it had to sell the securities to raise cash, the losses came back to bite.Mr. Barr’s proposed adjustments would require banks with assets of $100 billion or more to account for unrealized losses and gains on such securities when calculating their regulatory capital, he said.The changes would also toughen oversight for a wider group of large banks. Mr. Barr said his more stringent rules would apply to firms with $100 billion or more in assets — lowering the threshold for tight oversight, which now applies the most enhanced rules to banks that are internationally active or have $700 billion or more in assets. Of the estimated 4,100 banks in the nation, roughly 30 hold $100 billion or more in assets.Mr. Katz said the expansion of tough rules to a wider set of banks was the most notable part of the proposal: Such a tweak was expected based on remarks from other Fed officials recently, he said, but “it’s quite a change.”The bank blowups this year illustrated that even much smaller banks have the potential to unleash chaos if they collapse.Still, “we’re not going to know how significant these changes are until the lengthy rule-making process plays out over the next couple of years,” said Dennis Kelleher, the chief executive of the nonprofit Better Markets.Mr. Kelleher said that in general Mr. Barr’s ideas seemed good, but added that he was troubled by what he saw as a lack of urgency among regulators.“When it comes to bailing out the banks, they act with urgency and decisiveness,” he said, “but when it comes to regulating the banks enough to prevent crashes, they’re slow and they take years.”Bank lobbyists criticized Mr. Barr’s announcement.“Fed Vice Chair for Supervision Barr appears to believe that the largest U.S. banks need even more capital, without providing any evidence as to why,” Kevin Fromer, the chief executive of the lobby group the Financial Services Forum, said in a statement to the news media on Monday.“Further capital requirements on the largest U.S. banks will lead to higher borrowing costs and fewer loans for consumers and businesses — slowing our economy and impacting those on the margin hardest,” Mr. Fromer said. Susan Wachter, a finance professor at the University of Pennsylvania’s Wharton School, said the proposed changes were “long overdue.” She said it was a relief to know that a plan to make them was underway.The Fed vice chair hinted that additional bank oversight tweaks inspired by the March turmoil were coming.“I will be pursuing further changes to regulation and supervision in response to the recent banking stress,” Mr. Barr said in his speech. “I expect to have more to say on these topics in the coming months.” More