Monday, April 15, 2024

U.S. Senate Banking Republicans Urge Withdrawal of Basel III Endgame Proposal

by BIZ Magazine

U.S. Senator John Kennedy, along with Senator Tim Scott and Senate Banking Republicans, is renewing the call for regulators to abandon the Basel III Endgame Proposal, which aims to increase bank capital requirements. The senators argue that the proposal, if implemented, could have widespread negative impacts on various sectors of the economy.

The senators initially raised concerns in a letter sent in November, highlighting potential repercussions on affordable housing, mortgage lending, small business lending, consumer lending, and the accessibility of credit cards and home equity lines of credit. They also emphasized the potential disadvantage it could create for U.S. companies compared to their foreign counterparts.

In a recent letter, the senators expressed continued reservations about the lack of economic analysis justifying the need for the proposal and raised questions about the adequacy of the capitalization of the current banking system. Testimonies from Senate Banking Committee hearings on November 14 and December 6, 2023, further deepened their concerns.

The senators pointed to the testimony of CEOs from the eight largest banks, who discussed the proposal’s potential hindrance to economic growth and its adverse effects on lending to households and businesses. Additionally, there were specific concerns raised about the disproportionate negative impacts on minority communities, particularly Low to Moderate Income (LMI) and minority borrowers.

Highlighting a potential oversight, the senators referred to the Federal Reserve’s acknowledgment that it did not appropriately consider the impacts of the proposal when initiating additional data collection in October 2023. This admission raised questions about the comprehensiveness of the proposal’s effects.

The Basel III Endgame Proposal, issued in July by the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, suggests revisions to bank capital requirements. These revisions are aligned with changes to international capital standards issued by the Basel Committee on Banking Supervision in Switzerland following the 2007-2009 financial crisis.

The proposed rule aims to apply to banks with assets exceeding $100 billion, impacting the largest banks in the U.S. and potentially altering their lending and trading practices. The letter was also signed by Senators Mike Crapo, Mike Rounds, Thom Tillis, Bill Hagerty, Cynthia Lummis, J.D. Vance, Katie Britt, Kevin Cramer, and Steve Daines.

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