WASHINGTON, March 12 (Reuters) - Large bank capital requirements will fall slightly under revised drafts of sweeping bank capital rules, Federal Reserve Vice Chair for Supervision Michelle Bowman said Thursday, in a major victory for Wall Street lenders that beat back capital hikes under earlier drafts.

Speaking at the Cato Institute in Washington, Bowman outlined the changes to the so-called Basel rules and "GSIB surcharge" which determine how much money banks must set aside to absorb potential losses, saying they would in aggregate lower large bank capital requirements by a "small amount" via a "sensible recalibration" of existing rules.

Bowman, who was appointed to the role last year by Republican President Donald Trump, said the changes would eliminate overlapping standards and calibrate requirements to match actual bank risks, arguing a steady increase in how much banks must set aside against potential losses has been misguided.

"When capital requirements become excessive, they impair the banking system's fundamental function of providing credit to the real economy," she said according to prepared remarks.