Banks have had a stellar first quarter. The major U.S. banks raked in nearly $50 billion in profits in the first three months of the year, The Guardian reported.

That was largely due to Wall Street bank traders, who profited from a volatile stock exchange, Reuters showed.

But even without the extra bump from stock trading, banks are doing well when it comes to interest, the same Reuters article found. And some banks could stand to benefit even more from this one potential rule change.

Morgan Stanley thinks it could have a major impact on Citi in particular.

Upcoming changes for banks

To understand why Morgan Stanley thinks things are going to change at Citi, you need to understand some recent bank rule changes.

Banks make money by lending out money, which usually comes from depositors. But people need access to their money and the right to withdraw whenever they want.

So, banks keep a percentage of all money deposited to make sure they can cover what the average person needs.

But what happens if there is a major demand for withdrawals, as we saw during the financial crisis of 2008?

That’s where capital requirements come in. After the financial crisis, major banks like Citi were required by law to hold a higher percentage of money in order to avoid major bank failures.

For years, banks had to put aside billions of dollars. Money that couldn’t be lent out or even returned to shareholders.

Now, that’s all about to change.

Capital change requirements for major banks

Banks that are considered globally systemically important banking organizations (G-SIBs) have a higher capital buffer than community banks as they usually engage in banking activity that is far more complicated than your average market loan.

The list depends on the size of the bank and its underlying activity, according to the Federal Reserve.

Current global systemically important banks

A proposal from U.S. federal banking regulators could drastically reduce the amount that these large banks have to hold in reserve.

Changes would result in the largest U.S. banks holding an average 4.8% less. While that might seem like a small percentage number, for banks of this size, it equates to billions of dollars, according to a Federal Reserve memo.

The proposed changes were a long time coming, Robert Sarama, a financial services leader at PwC, told TheStreet.

“It’s a bit of a recognition that perhaps the pendulum swung a little too far in the higher capital requirement following the financial crisis, making it harder for banks to participate in some markets,” he said.

Citi’s upcoming relief  

Citi is a G-SIB and as such, is subject to the capital requirement rules. And the fact that it could get 4.8% of its money back to spend elsewhere is why Morgan Stanley is so optimistic about the bank.

In a research note, Morgan Stanley analysts said they expect Citi’s annualized net income to be better than expected due to the upcoming capital relief.

While Citi stated its return on average tangible common equity (ROTCE), a type of financial measure, to be close to 13% by 2028, “the fact that Citi’s near-term and medium-term targets excluding capital relief were only marginally below our expectations including capital relief actually suggest upside to our numbers if Citi can deliver,” the note said.

More bank news

In fact, Citigroup’s own projections are likely conservative and it’s likely to show improvement each year, the analysts expanded.

“We have high conviction that the proposed capital rules will be finalized later this year and expect Citi can eventually revise the medium-term targets higher, suggesting further upside to consensus,” the Morgan Stanley analysts wrote.

Related: Citi just added an AI agent to your wealth management team

This story was originally published by TheStreet on May 11, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.

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Those who use the scheme, don’t have to pay for lender’s mortgage insurance (LMI), which essentially gets picked up by the backing of the Australian taxpayer.

But as the housing market cools, and prices in Melbourne and Sydney start to reverse, housing economists have warned buyers with a small deposit are a lot more vulnerable, and could quickly find themselves in negative equity.

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New borrowers, including those who have used the 5 per cent deposit scheme, are falling behind on payments at a much higher rate this year. In the month of February, 0.78 per cent of new mortgage holders were 30 days in arrears, which is twice as high as the 0.39 per cent of borrowers who purchased their home earlier, according to data from the credit bureau Equifax, which was shared with Yahoo Finance.

“The scheme encourages risky borrowing and bidding. Borrowers are gambling with the taxpayers money,” former RBA economist Peter Tulip remarked online last week.

RELATED: Warning as Aussie couple face bankruptcy after using 5 per cent deposit scheme

But for a vast majority, like Natasha and Luke, they still have room to move. According to Loan Market broker Samuel Power, who helped the couple into their loan, their cautious borrowing approach is a common story.

“The only time we would look to move closer to that top-end borrowing limit is if it is the difference [for a client] between getting in or not, provided there is a strategy in place to be comfortable making repayments into the future,” he told Yahoo Finance.

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“A key shift we are noticing is there is a shortage of stock in the price range typically favoured by first-home buyers and investors, which seems to be limiting both groups,” he added.

As Natasha works as an actor with unsteady income, the bank assessed the loan on the basis of Luke’s income, who works as an engineer for a Virgin Australia subsidiary.

“We’ve actually had three cash rate increases since we got our pre-approval, which is frustrating,” Natasha admitted.

“If the rate rises continue, then it’ll be consumption spending in our budget that gets cut.”

Two sides to first home buyer ‘band-aid’

Although she works in the entertainment industry, Natasha studied International Business and Economics at RMIT to get her degree.

She understands there is an inherent conflict at the heart of the policy that she believes made the difference to becoming a homeowner.

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“It’s funny, I know economists have been sort of across the board very negative about the 5 per cent deposit scheme in terms of pushing prices up. Having studied economics, I understand that, but at the same time, I’ve benefited,” she said.

“So you know, sometimes a policy can work for you, even though you might think it’s not going to work long-term in the economy.

“So, yeah, it’s complicated … policy tends to be a band-aid, rather than something that’s actually structural change.”

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Earlier this month, senior officials at the World Health Organization (WHO) told journalists in a newly refurbished pressroom at the agency’s headquarters that its finances were “stable”. Following a year that saw its biggest donor withdraw as a member, forcing it to cut 25 per cent of its staff, its financial chief said that 85 per cent of its 2026 and 2027 budget had been financed.

“While we are looking at resource mobilisation, we’re also looking at tightening our belts,” Raul Thomas, assistant director general for business operations and compliance, explained, admitting that the WHO “will have great difficulty mobilising the last 15 per cent”.

Sitting at the centre of the press podium, surrounded by his deputies, Tedros Adhanom Ghebreyesus, WHO director general, backed up Thomas’s outlook. “We are stable now and moving forward”, since the retreat of the United States from the health body, he said. The Ethiopian noted that the WHO’s financial reform, allowing for incremental increases in state member fees, has been a big plus.

Mandatory contributions have historically accounted for only a quarter of the organisation’s total funding. States have agreed to raise their contributions by 20 per cent twice, in 2023 and in 2025. Further increments are scheduled to be negotiated in 2027, 2029 and 2031 to bring mandatory funding up to par with voluntary donations that the agency relies on. The WHO also reduced its biennial budget for 2026 and 2027 from $5.3 billion to $4.2bn.

“Our financing actually is better,” Tedros emphasised. “Without the reform, it would have been a problem.”

Read more: Nations agree to raise their WHO fees in wake of US retreat

Nonetheless, the director general, now in his final year at the UN agency, warned that member states should not assume that the financial road ahead will be clear. “The future of WHO will also be defined by how successful we are in terms of the assessed contribution increases or the financial reform in general.”

As west retreats, others step in

Suerie Moon, co-director of the Global Health Centre at the Geneva Graduate Institute, explains that every year at the WHO, there’s “a non-stop effort” to ensure funding. She says a continued reliance on non-flexible, voluntary funding earmarked for specific projects, as well as donors withholding contributions – sometimes for political leverage – complicates the organisation’s financial plans. Meanwhile, ongoing cuts and predictions of a global economic downturn stemming from the war in the Middle East may further aggravate the situation, as costs rise and member states focus on national spending needs.

Soaring prices driven by the conflict and supply chain disruptions have already affected the WHO’s procurement of emergency health kits for crises, officials at the global health body said. “We are continuing to negotiate at least from a procurement standpoint on how we can bring down a little bit the prices or reduce the increases, but we are seeing it across the board,” said Thomas.

Altaf Musani, WHO director of health emergencies, meanwhile, said aid cuts have already deprived roughly 53 million people in crisis situations of access to healthcare.

Last month, Thomas told the Association of Accredited Correspondents at the UN at the end of April that the agency is looking at non-traditional, or non-western, donors for funding to close the biennial 15 per cent funding gap. “It’s not that we won’t go to the traditional donors, but we’re expanding that donor base.”

Since the dramatic drop in funding from the US, formerly the WHO’s biggest contributor, Moon highlights that there hadn’t been a “sudden jump by non-traditional states to compensate for the US”. Last May, at the World Health Assembly, China pledged $500 million in voluntary funding until 2030, a sharp rise from the $2.5m it contributed over 2024 and 2025.

The WHO did not respond to questions from Geneva Solutions about how much of the pledged amount had been disbursed. China’s mission in Geneva did not respond to questions raised about the funding.

Other countries, particularly Gulf states, have meanwhile been increasing their voluntary contributions to the organisation in recent years. Similarly to “western liberal democracies have in the past”, Moon explains that they may be seeking “to raise their profile and prioritise health as one of the issues that they would like to be known for”. She noted that the shift in the UN agency’s list of top donors may affect how it manages the money.

‘Sustainable’ spending

Amid these financial uncertainties, WHO executives say the organisation is also reviewing its expenditure through “sustainability plans”. This includes working more closely with collaborating centres, including universities and research institutes that support WHO programmes and are independently funded. On influenza, for example, the WHO works with dozens of national centres around the world, including the Centers for Disease Control and Prevention in the US,

When asked about any plans for further job cuts, Thomas denied that these were part of the WHO’s current strategies, but could not rule them out entirely as a future possibility. Instead, he said, the organisation was “looking at ways to use funding that may have been for activities to cover salaries in the most important areas”.

Meanwhile, WHO data shows that the number of consultants employed by the agency by the end of 2025 decreased by 23 per cent, slightly less than the staff reductions. Global heath reporter Elaine Fletcher explained to Geneva Solutions that consultants continue to represent a significant proportion of the agency’s workforce, at 5,844 – including an overwhelming number hired in Africa and Southeast Asia – compared with regular staff numbering 8,569 in December.

Upcoming donor politics

The upcoming change in leadership will also be a strategic moment for the organisation to boost its coffers.  Moon says the race for the top job at the organisation may attract funding from candidates’ home countries, which could be seen as a strategic opportunity. 

Given the relatively small size of the WHO budget, compared to some government or agency accounts, “you don’t have to be the richest country in the world to dangle a few 100 million dollars, which could go a long way in their budget,” the expert notes.

The biggest ongoing challenge, however, will be whether major donors will announce further aid cuts. In the medium and longer term, “countries will have to  agree on the step up every two years, and there’s always drama around that.”