- 1Banks hold about $600B in business loans originated under $1M, Bowman said.
- 2Banks over $700B in assets provide 18% of loans under $1M and 33% under $100K.
- 3Proposals would cut risk weights on small business loans and adjust card treatment.
Banks remain the main source of small business credit, and the Federal Reserve is weighing capital changes meant to make that lending cheaper for them, Vice Chair for Supervision Michelle W. Bowman said in a speech at a Consumer Bankers Association event.
The data
"Currently, banks hold roughly $600 billion in business loans that were originated under $1 million," Bowman said. She added that although large banks are less concentrated in small business lending, they are a significant source of credit: as of the second quarter of 2025, banks with over $700 billion in assets provided about 18% of business loans below $1 million and 33% of those below $100,000. She acknowledged that credit is still tight.
The proposals
Under the standardized approach proposal, the risk weight for corporates would fall from 100% to 95%. The Basel III proposal would make three changes:
- For small business loans above $1 million, the risk weight would generally drop from 100% to 65% for businesses the lending bank considers investment grade, freeing capital for additional lending.
- For small business loans under $1 million, the risk weight would generally fall by 25 percentage points, from 100% to 75%, to reflect the lower risk of diversified portfolios of smaller loans.
- For small business credit cards, capital treatment would better match actual risk and rely more heavily on repayment history. The Fed is also seeking comment on whether the treatment of unused credit lines reflects their risk.
The proposed changes are in an open comment period, and Bowman encouraged stakeholder feedback.
Source reporting: deBanked.
