Every bank sits on a cushion of capital. It is the owners' money that absorbs losses before depositors are touched.

How thick that cushion must be is set by rules, not by the bank alone.

Those rules are being rewritten right now, and the fight is about how thick is enough.

The main measure is the common equity tier 1 ratio, or CET1.

A 2023 plan called Basel III Endgame would have raised big-bank capital by about 19%.

After heavy industry pushback, regulators previewed a smaller rise of about 9% in September 2024.

On February 28, 2025, Fed supervision chief Michael Barr stepped down from that role.

New leadership is expected to propose a lighter version of the rules.

A bank funds its loans mostly with deposits and other borrowed money.

A thin slice is the owners' own capital. That slice absorbs losses first.

The CET1 ratio measures that slice against the bank's risk-weighted assets.

Riskier assets carry more weight, so they require more capital behind them.

If losses eat through the cushion, the bank fails or needs a rescue.

More capital means more safety, but also less lending firepower per dollar.

The first stress point is the size of the cushion. Too thin, and a bad year can wipe it out.

That is close to what happened to Silicon Valley Bank in March 2023, though bad rate bets played a role too.

The second is risk weights. If a rule underrates a risk, the cushion behind it is too small.

The third is the trade-off. Higher capital is safer but can slow lending and growth.

The rewrite is a fight over where to set that balance.

U.S. big banks hold far more capital than they did before 2008, and that is real progress.

The system is sturdier for it, and that deserves credit.

What can break is confidence if the rules are loosened too far, or lending if they are set too high.

You can watch the numbers. Each big bank reports its CET1 ratio every quarter.

The Fed's yearly stress test shows how the cushion holds up in a modeled crash.

Bank capital is the cushion between a bad year and a bailout, and the rules set its thickness.

The Basel III Endgame rewrite will decide whether that cushion grows a little or stays flat.

The next test is the new proposal and the yearly stress test results. Watch each big bank's CET1 ratio.