Beginning in March 2023, isolated bank failures due to inadequate capital levels prompted the Board of Governors of the Federal Reserve System, FDIC, and OCC to propose substantial revisions to Basel III in an effort to strengthen the resilience of the U.S. banking system. Known as Basel III Endgame, the proposal deviates from international standards. It requires standardized modeling to evaluate loan, operational, and market risks, and raises common Tier 1 capital requirements by 16% to as much as 20% for the largest U.S.-based and global systemically important banks with $100 billion or more in assets.
A handful of letters from academics, think tanks, and 12 Senators — including Senate Banking Committee Chairman Sherrod Brown (D-OH) — expressed support for the rule as proposed, arguing it would reduce systemic risk and increase lending.
However, nearly all comment letters, including those submitted by Democratic- and Republican-elected officials, contained negative responses to the proposed rule, either opposing it outright or expressing serious concerns related to access to credit and potential harm to the capital markets.
The financial services industry is also pushing back. The American Bankers Association and 51 state bankers’ associations expressed “deep concerns” about the proposal, arguing it would lessen the availability of credit and essential financial services across the country, especially for small businesses, homebuyers, and minority communities.
Basel III is scheduled to take effect July 1, 2025. A final rule regarding Basel III Endgame is pending with U.S. regulators, if approved, it would phase in the higher capital requirements over three years with full implementation by July 1, 2028.
Your Rehmann team closely monitors this and other regulatory issues. For the latest updates, contact Kevin Frank at [email protected] or talk with your Rehmann advisor.
