New PwC report finds Basel III Endgame would negatively impact the U.S. economy

PwC released a new report titled "Basel III Endgame: Assessing the bigger picture," which breaks down Basel III Endgame's impact on the broader economy.

A few highlights:

Basel III Endgame will have a negative impact on GDP: The authors find the proposal could cut U.S. GDP by half a percentage point. "Overall, a negative impact to GDP driven by higher borrowing costs would have a range of impacts to the broader economy (…) for historical context, the U.S. compound annual growth rate over the past 10 years is 2.1%, meaning growth would decline by approximately 25% under the negative outlook."

The proposal will lead to reduced lending and higher borrowing costs: "Higher capital costs will either materialize as reduced returns to bank shareholders (including indirect shareholders through pensions and mutual funds) or through increased costs to consumers."

U.S. banks would be put at a disadvantage in comparison to their international counterparts: "The NPR’s requirements would raise costs for U.S. banks in ways that would not apply to foreign competitors for the same transactions. This outcome would undermine the goal of having globally consistent capital requirements and create a misalignment of risk, whereby capital requirements for the same risks would differ by jurisdiction."

This report further reinforces a message that diverse stakeholders have been voicing for months: Basel III Endgame is bad for the economy and consumers. It's time for regulators to scrap the proposal and start over.