The Federal Reserve proposed retooling capital rules and annual “stress tests” for the largest U.S. financial firms, the first major big-bank rule change of the Trump era.

The Fed on Tuesday said the changes would simplify rules for big banks such as JPMorgan Chase & Co. and Wells Fargo & Co. without endangering the financial system. “This proposal significantly simplifies our capital regime while maintaining its strength,” said Randal Quarles, Fed vice chairman for supervision.

Some...