Bank deregulation set to unlock $2.6tn of Wall Street lending capacity

Wall Street is about to get a historic boost. New findings from Alvarez & Marsal show that the Trump administration’s deregulation drive will open up nearly $2.6 trillion in new lending power for U.S. banks.

The rollback of post-crisis capital rules, those designed after the Great Recession in 2008, is expected to free $140 billion in locked capital for America’s biggest lenders, setting off pressure on regulators in Europe and Asia to reconsider their own limits.

Since Donald Trump returned to the White House nine months ago, U.S. regulators have eased constraints that once forced banks to maintain large loss-absorbing buffers. The updated rules will strengthen the position of many Wall Street giants, allowing them to channel more money into AI, data centers, and energy infrastructure while also boosting shareholder payouts.

The policy reversal will benefit the largest financial institutions far more than regional banks struggling with credit costs and liquidity tightening.

Trump’s deregulation drive unlocks massive lending firepower

Fernando de la Mora, co-head of financial services at Alvarez & Marsal, said Trump is “kicking off a major wave of deregulation, unlocking a huge amount of capacity, which will give a massive economic boost and an earnings uplift.”

The consultancy’s data shows a 14% cut in common equity tier one capital requirements for American banks, a rule that dictates how much equity must be held against losses. That reduction alone could lift earnings per share by 35% and returns on tangible common equity by 6%, helping banks scale credit and push deeper into high-yield markets like crypto and AI financing.

The full report details how similar deregulation might ripple through other markets, as the U.K. is expected to trim bank capital requirements by 8%, likely to preserve competitiveness with the U.S. But EU regulators are taking a different path, preparing to raise requirements by 1%, while Switzerland is set for an even bigger jump of up to 33%. The Swiss proposal could force UBS to raise $26 billion in fresh capital after rescuing Credit Suisse, a move aimed at preventing another financial shock.

“This is going to drive a further market share gain by U.S. banks,” de la Mora added, saying U.K. banks would maintain ground while Swiss and EU lenders lose momentum. With looser restrictions and billions in freed-up funds, Wall Street is positioned to outpace global rivals as the balance tilts back toward U.S. dominance.

Federal Reserve and regulators back easing despite global concern

JPMorgan Chase will likely see the biggest payoff, with an estimated $39 billion in capital released from its balance sheet. That will raise its earnings per share by 31% and its return on equity by 7%, giving it extra flexibility to lend and invest. Within Washington, Michelle Bowman, newly appointed vice-chair of supervision at the Federal Reserve, has been one of the loudest voices for loosening capital rules. She has criticized the strict standards of the past decade, arguing they “pushed lending into private credit markets” and reduced traditional banking activity.

Regulators have already outlined plans to relax requirements for banks to hold fixed levels of high-quality capital relative to total assets. They also intend to change the extra capital buffers for the biggest banks and redesign the annual stress tests that limit risk-taking.

Huw van Steenis, vice-chair of Oliver Wyman, said, “There is a capital investment boom in the U.S. to be financed — for AI, data centers, energy infrastructure and some reshoring. This recalibration of regulation will help banks lean into this financing wave.” His comment reflects the private sector’s anticipation of a massive credit expansion as the rules ease.

But not everyone is on board. Christine Lagarde, president of the European Central Bank, warned against a “regulatory rollback” that could endanger financial stability. Andrew Bailey, governor of the Bank of England, added that regulators must avoid “the baby being thrown out with the bathwater” as they adjust oversight.

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