Consumer & small business impact
U.S. economic impact
U.S. competitiveness
Banking's proven resilience
THE REAL COST OF
BASEL III ENDGAME:
UNDERSTANDINGWASHINGTON'S CAPITALREGULATION PLAN
Everyday Americans must not bear the brunt of Washington's proposal. The initial proposal for Basel III Endgame would have resulted in elevated borrowing costs and decreased access to credit for consumers.
THE NEW CAPITAL REGULATION PLAN WILL HARM:
Lower- and
Middle-Income
Families:
Increased borrowing costs will put large purchases, such as a car or appliances, further out of reach for lower- and middle-income Americans that rely on credit to secure high-value, necessary expenditures.
Small and new businesses rely on loans to run their operations, make payroll, and contribute to their local economy. Without reliable access to credit, they become more vulnerable, affecting the hiring of new employees and expansion plans.
Farmers who often use hedging in their operations will also face higher costs and fewer options. Decreasing farmers’ access to credit will make it harder for them to finance their operations, purchase equipment, or invest in their farms. This can cause a ripple effect on an already vulnerable industry—impacting local economies, agricultural suppliers, and food processors.
Federal regulators' proposal
will drive these individuals towards costlier and riskier methods of capital acquisition, such as the shadow banks.
It will hurt the economy at a time of high inflation.
Higher capital requirements prevent banks from having more funding available to lend to consumers, making it harder for consumers to buy houses, cars, or make appliance repairs—all of which will slow the economy at a time when inflation continues to remain high.
A substantial increase in capital requirements could raise annual borrowing costs. This would cost the economy over $100 billion annually and result in more lending by shadow banks.
The Peterson Institute found that raising capital requirements by two percentage points would decrease the U.S. GDP by $1 trillion over 30 years.
It will put foreignbusinesses aheadof U.S. businesses.
No other country or jurisdiction plans to adopt the approach proposed in Washington's capital regulation plan.
Large U.S. banks are already subject to stricter capital requirements and maintain more equity capital on their balance sheet than their European competitors, putting American businesses at a disadvantage.
This proposal will mean that some foreign businesses will be able to borrow at a lower cost, giving them an unfair competitive advantage over U.S.-based companies that borrow from U.S. banks.
U.S. banks haveproven resilient throughunprecedented economic disruptions.
The nation's largest banks have acted as a source of strength during the COVID-19 pandemic and the banking turmoil of 2023, facilitating credit to small and large businesses and providing billions in deposits to First Republic Bank to help stem contagion within the banking industry.
"Our banking system is sound and resilient."
— Michael Barr,
Vice Chair for Supervision at the Federal Reserve
The Federal Reserve said in its May 2023 Financial Stability Report that the largest U.S. banks are 'well capitalized,' and when releasing the results of its annual stress test in June, the Fed said, "large banks are well positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession.
Bank capital has tripled over the last 15 years, and even Michael Barr, Vice Chair for Supervision at the Federal Reserve, agrees: "Our banking system is sound and resilient."
Three things to consider ahead of Barr's speech tomorrow
One chart you need to see today
Three things to keep in mind about Basel III Endgame ahead of the Jackson Hole Economic Symposium
As August travel peaks post-Olympics, remember that Basel III Endgame threatens to upend transportation prices
GAO report calls for improvement of regulatory analysis
Basel III Endgame will make U.S. less competitive
The Wall Street Journal
Powell: Significant Progress on Revamped Big-Bank Capital Rules
MarketWatch
Fed Chair Powell sees 'broad and material changes' to Basel III endgame
Bloomberg Government
Powell Says Regulators Are Near a Revamped Bank-Capital Plan (2)
Reuters
Powell: 'Essential' that bank regulators re-propose Basel plan
PwC
New PwC report finds Basel III Endgame would negatively impact the U.S. economy
Financial Times
Top US banks withstand annual ritual of Federal Reserve ‘stress tests’
CNBC
Green energy projects at risk: Banks team up to fight proposed capital requirement rules
Another Bill Americans Can't Afford Campaign Launches New Ads During SOTU
FSF
Campaign Launches New Ads During SOTU
FSF
Forum CEO: Analysis Shows Excessive Cost of Capital Proposal
Bloomberg Government
Bowman says Fed’s capital plan needs substantive changes
Yahoo Finance
Even some Fed officials are now questioning the Fed's new bank capital rules
The Bond Buyer
Muni advocates warn of fallout from proposed Basel III capital reforms
Reuters
Big US banks to call on Fed to rewrite contentious bank capital rule
Politico Pro
Fed’s Waller – Agencies should start over again on capital proposal
FSF
Press Release: Basel III Endgame proposal would harm American households, businesses, and the broader economy
Politico Pro
Housing groups warn of reduced mortgage access from Basel proposal
FSF
Press Release: Highlighting Concerns on Basel III Endgame
FSF, ABA, BPI, SIFMA
Associations' Letter Regarding B3E Impact on U.S. GSIBs
FSF
Press Release: Required Bank Capital Increase Would Far Exceed Government Estimates
FSF
What They're Saying About Basel III: December 2023
American Banker
Joe Biden’s bank capital proposal will derail economic growth
Reuters
UK lenders face smaller impact from Basel rules than rivals, BoE says
The Washington Post
The racial homeownership gap is widening. New rules might make it worse.
Yahoo Finance
New bank rules could push mortgage rates up 30%
FSF
FSF CEO: Higher Capital Requirements Would Harm "Everybody Across the Economy"
What They're Saying: Policy Experts, Consumer Groups, and Industry Organizations on the Impact of the Basel III Endgame Proposal
FSF
Campaign video: Another Bill Americans Can’t Afford
FSF
Basel III Endgame Capital Requirements Would Handicap Small Businesses
FSF
Basel III Endgame Market-Making Requirement Threatens Liquidity, Economy, and Financial Stability
FSF
Policymakers express concerns over economic impact of Washington's proposed capital regulation plan
FSF
Press Release: The Basel III Endgame Proposal – Separating Fact from Fiction
Forbes
What’s the problem, and why is harming banks the solution?
Press Release: New TV ad raises awareness of negative economic consequences of Basel III Endgame for Americans
Third Way
Don’t ignore small businesses’ capital requirements
American Banker
Basel endgame will drive up costs for American farmers and consumers
U.S. Senate Banking Committee GOP Members
U.S. Senate Committee on Banking, Housing, and Urban Affairs: Basel III Banking GOP Letter
FSF
Press Release: Federal Reserve Research Underscores the Illogic of Recent Capital Proposal
HousingWire
Bank capital requirements would put squeeze on mortgage market
American Banker
Fed policies continue to batter small businesses
American Banker
Banks ‘flying blind’ without cumulative data on regulatory proposals
Press release: New campaign will raise awareness of negative economic consequences of Basel III Endgame for everyday Americans
CNBC
Americans Can't Afford Another Bill campaign pushes back against bank capital requirements hike
American Banker
BankThink Higher bank capital requirements would harm low-income borrowers most
American Banker
FDIC's McKernan questions rationale behind Basel endgame standards
POLITICO
The calls are coming from inside the house: Dems rap Biden bank cops
The Urban Institute
Bank Capital Notice of Proposed Rulemaking
American Council on Renewable Energy
The Impact of Proposed Bank Regulatory Capital Requirements on Tax Equity Investment in Clean Energy
NAACP, National Housing Conference, National Urban League
Housing Groups Letter on Bank Capital
FSF
U.S. vs. European Capital Adequacy - The Increasingly Unlevel Playing Field Unfolding in Basel III Finalization
FSF
Don’t Paint the House Before Finishing the Roof: Basel III Finalization and the Large Bank Capital Regime