Washington. D.C. – Bank Policy Institute President and CEO Greg Baer will testify today before the House Financial Services Subcommittee on Financial Institutions and Monetary Policy at a hearing titled “Implementing Basel III: What’s the Fed’s Endgame?” In his testimony, Baer details how substantial capital requirement increases resulting from the banking agencies’ Basel Endgame proposal will affect every person and every business in the United States if the proposal is implemented in its current form.
Key Quote: “If adopted, the proposed rule would complete a sea change in capital regulation: a move from the government ensuring safety and soundness of banks to the government allocating credit across the economy. The proposed rule’s 1,000-plus pages assess and specify the risk of every loan made by a bank and every other type of product offered by a bank. Of course, because the Basel agreement was drafted as a one-time, one-size-fits-all approach, it ignores unique features of borrowers and does nothing to accommodate nuance among products or differences in risk management among banks. Rather, it groups loans together broadly by type. But to be sure, your loan is in there somewhere. And to an unprecedented extent in the history of this country, the decision of whether you get that loan and how it will be priced would be taken out of the hands of loan officers at banks and vested in the formula-writers in Basel and the stress testers at the Federal Reserve.”
What’s happening: The recently unveiled Basel Endgame proposal from the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency aims to require financial institutions to hold significantly higher capital, as much as 25% more, depending on the size of the institution. This would limit banks’ capacity to offer things like mortgages, car loans, credit cards and small-business loans. The proposal will push consumers to unregulated, more expensive financial services products.
Legal defects: The proposed rule would impose massive costs on the economy, which it minimizes or ignores in clear violation of the law. BPI and 5 other trade associations wrote a letter to the banking agencies this week calling on them to re-propose the rule and stating that the agencies violated basic legal obligations of the APA. When proposing a rule, agencies must identify and make available all data and analyses the agencies used to develop the proposal so that the public has a meaningful opportunity to consider and respond to the agencies’ rationale through the public comment process.
Learn more: StopBaselEndgame.com
About Bank Policy Institute
The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.
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