As central bankers and other policymakers gather at the annual Jackson Hole Economic Policy Symposium, here are three points they should keep in mind when it comes to Basel III Endgame and its likely impact on the economy:

The nation's largest banks have proven their resiliency and are well-positioned for potential economic turbulence.

• Michael Barr, Federal Reserve Vice Chair for Supervision, stated that the Federal Reserve annual stress tests demonstrate large banks have sufficient capital to withstand a "highly stressful scenario." "This year's stress test shows that large banks have sufficient capital to withstand a highly stressful scenario and meet their minimum capital ratios… The goal of our test is to help to ensure that banks have enough capital to absorb losses in a highly stressful scenario. This test shows that they do." (Vice Chair for Supervision Michael S. Barr, "Statement on 2024 Stress Test Results by Vice Chair for Supervision Michael S. Barr," 6/26/2024)
  • According to the same statement from the Federal Reserve: "All 31 banks tested remained above their minimum common equity tier 1 (CET1) capital requirements during the hypothetical recession…" (Federal Reserve, Statement, 6/26/24)
• The largest U.S. banks have significantly enhanced the quality and quantity of their capital. Since 2009, the Global Systemically Important Banks, or GSIBs, have tripled their Common Equity Tier 1 capital to $940 billion. (National Information Center FR Y-9C data, 5/2024)
• Federal Reserve Chair Jerome Powell stated that U.S. banks remain strong. "U.S. banks are well capitalized." (Federal Reserve Chair Jerome Powell, Hearing Entitled: Semiannual Monetary Report to Congress, 3/7/2024)

The proposed changes in Basel III Endgame could make borrowing measurably more expensive and decrease the availability of credit for consumers.

• Former Federal Reserve Governor Randall Kroszner warns that the proposal may impact banks' ability to provide loans and credit, disproportionately impacting low- and moderate-income borrowers and minority businesses. "First, all other things equal, increasing capital requirements for banks will increase their cost of lending and undertaking various bank activities. This has consequences through two channels. One channel is that banks would in part or in full pass on the increase in the costs to borrowers, end-users, or other customers. Low- and moderate-income borrowers as well as minority businesses, for example, may face higher costs and lower availability of credit." (Former Federal Reserve Governor Randall Kroszner, White Paper, 2/5/2024)

The Basel III Endgame proposal will make the cost of goods more expensive for farmers, manufacturers, small businesses, utilities, airlines, and their customers.

• Federal Reserve Governor Christopher Waller warns that Basel III Endgame could increase costs without "clear benefits" to the financial system. "I am concerned that [this] Basel III proposal will increase the cost of credit and impede market functioning without clear benefits to the resiliency of the financial system… This will raise costs for American families and businesses, which could harm many of them and hinder economic growth." (Federal Reserve Governor Christopher Waller, "Statement by Governor Christopher J. Waller," 7/27/2023)

A full re-proposal of Basel III Endgame is necessary to protect the economy and all Americans.