Coalition of Financial Trades Warn Banking Agencies Materially Underestimated Basel Proposal’s Economic Impact

Ladies and Gentlemen:

The Financial Services Forum (the “Forum”), the American Bankers Association, the Bank Policy Institute, and the Securities Industry and Financial Markets Association (the “Associations”)[1] are writing this letter to the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (collectively, the “Agencies”) in regard to the Agencies’ proposed rulemaking that would substantially revise the capital requirements applicable to large banking organizations (the “Proposal”),[2] and in particular to the Proposal’s Impact and Economic Analysis. The Proposal would apply to the U.S. global systemically important bank holding companies (“U.S. GSIBs”) and would also generally apply to banks with $100 billion or more in total assets. We believe the Agencies have materially underestimated the Proposal’s impact on the banking sector and the businesses and customers they serve. As detailed below, an analysis by the Forum shows that the Proposal would increase capital requirements for U.S. GSIBs by more than 30 percent, while increasing risk- weighted assets by more than 33 percent, dramatically more than the Agencies’ estimates described in the preamble to the Proposal. As we have emphasized from the beginning, increasing bank capital will have widespread economic effects, but stakeholders cannot effectively comment on, and regulators cannot control for, these outcomes if the rule’s basic assumptions are flawed.

To read the full comment letter, please click here, or click on the download button below.

[1] See Appendix for more information on the Associations. 

[2] 88 Fed. Reg. 64028 (Sept. 18, 2023).