Today, Federal Reserve Governor Michelle Bowman gave the keynote address at an event hosted by the Policy Exchange in London. In a sweeping discussion, Bowman touched on how Basel III Endgame as proposed in the U.S. runs the risk of harming global financial stability:

"In the absence of some degree of international coordination, there is a risk of creating a regulatory 'race to the bottom,' as regulators compete to grow their banking and financial systems by lowering regulatory and supervisory standards below levels that are appropriate based on risk. But this desire for greater international consistency can be equally frustrated when U.S. regulators excessively calibrate requirements. As I previously noted, the U.S. proposal was calibrated at a level well in excess of other international jurisdictions as well as without sufficient analytical support and evidence that the proposed increases were proportionate to risk.

This is not only a problem for international competitive equity, but also a concern for global financial stability. Significant banking activities occur in the international and cross-border context, and we know that financial stability risks can spread throughout global financial markets. The U.S. Basel proposal reflects elements of the agreed-upon standards, but it far exceeds them."

Governor Bowman finished her remarks by outlining the necessary steps her fellow regulators must take, including reproposing Basel III Endgame. It's time for all regulators to heed her advice and start over.