THE REAL COST OF
BASEL III ENDGAME:
UNDERSTANDINGWASHINGTON'S CAPITALREGULATION PLAN
Everyday Americans will bear the brunt of Washington's proposal. Basel III will result 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, appliances, or a home, further out of reach for lower- and middle-income Americans that rely on credit to secure high-value, necessary expenditures.

HOMEBUYERS:

Owning a home will become more difficult for many Americans, especially for first-time buyers and the underserved, as it will become significantly harder to acquire a mortgage. Making homeownership out of reach for many lower- and middle-income Americans will prevent families from building generational wealth, furthering the American wealth gap.

SMALL

BUSINESSES:

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:

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.

No one stands to lose more than hardworking Americans, who are already facing significant economic hardships.

Americans are already paying more for rent, food, gas, and other everyday necessities. High inflation, increasing interest rates, reduced credit, and the restarting of student loan payments will only increase the tab for Americans seeking a loan to finance their future.

It will disproportionately impact
historically underservedcommunities.
historicallyunderservedcommunities.

As the NAACP and others have warned Washington: implementing this proposal will undermine and devastate efforts to increase Black and minority homeownership.

The Urban Institute published research stating that the proposed capital regulation levels exceed necessary levels and will impact loans that are popular among first-time buyers, adversely affecting low- and middle-income borrowers and communities, and borrowers of color.

Implementing Washington's capital requirement plan will make it harder to secure a mortgage, especially for minorities and low income borrowers, only worsening the current wealth gap.

"[These standards] will have a devastating impact on our efforts to increase Black homeownership and disadvantage all first-time, and, in particular, first-generation homebuyers who do not have the benefit of multi-generational wealth or higher than average incomes."
— A letter by the NAACP, National Urban League, and other community advocacy groups.
According to the Center for American Progress, in 2019, the median wealth (without defined-benefit pensions) of Black households was $24,100. For white households, it was nearly 8 times more—$189,100. This gap is partly due to the disparity in high-value asset ownership between the two groups.
$24,100
BLACK HOUSEHOLDS
$189,100
WHITE HOUSEHOLDS
$52,190
AMERICAN HISPANICS
$195,600
non-Hispanic individuals

The disparity exists between American Hispanics and non-Hispanic individuals, as well. According to the American Banker, data from the 2020 census shows American Hispanics live in households with a median net worth of $52,190, compared with $195,600 for non-Hispanic individuals.

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.

$100
billion

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.

$1
TRILLION

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."

WHY IT MAKESZERO SENSE.VIEW ALL
Press Releases
02.5.24
FSF
Press Release: Federal Reserve Research Underscores the Illogic of Recent Capital Proposal
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Press Releases
02.5.24
FSF
Press Release: The Basel III Endgame Proposal – Separating Fact from Fiction
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News
02.5.24
American Banker
Banks ‘flying blind’ without cumulative data on regulatory proposals
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News
02.5.24
American Banker
Fed policies continue to batter small businesses
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News
02.5.24
HousingWire
Bank capital requirements would put squeeze on mortgage market
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News
02.5.24
Third Way
Don’t ignore small businesses’ capital requirements
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Resources
02.5.24
FSF
Basel III Endgame Market-Making Requirement Threatens Liquidity, Economy, and Financial Stability
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Resources
02.5.24
FSF
Basel III Endgame Capital Requirements Would Handicap Small Businesses
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News
02.5.24
Forbes
What’s the problem, and why is harming banks the solution?
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News
02.5.24
American Banker
Basel endgame will drive up costs for American farmers and consumers
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Press Releases
02.5.24
FSF
FSF CEO: Higher Capital Requirements Would Harm "Everybody Across the Economy"
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News
02.5.24
The Washington Post
The racial homeownership gap is widening. New rules might make it worse.
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News
02.5.24
Yahoo Finance
New bank rules could push mortgage rates up 30%
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Resources
02.5.24
What They're Saying: Policy Experts, Consumer Groups, and Industry Organizations on the Impact of the Basel III Endgame Proposal
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News
02.5.24
Reuters
UK lenders face smaller impact from Basel rules than rivals, BoE says
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News
02.5.24
American Banker
Joe Biden’s bank capital proposal will derail economic growth
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News
02.5.24
Politico Pro
Housing groups warn of reduced mortgage access from Basel proposal
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Resources
02.5.24
FSF, ABA, BPI, SIFMA
Associations' Letter Regarding B3E Impact on U.S. GSIBs
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News
02.5.24
Reuters
Big US banks to call on Fed to rewrite contentious bank capital rule
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News
02.5.24
Politico Pro
Fed’s Waller – Agencies should start over again on capital proposal
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Press Releases
02.5.24
FSF
Press Release: Required Bank Capital Increase Would Far Exceed Government Estimates
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News
02.5.24
Bloomberg Government
Bowman says Fed’s capital plan needs substantive changes
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Press Releases
02.5.24
FSF
Press Release: Basel III Endgame proposal would harm American households, businesses, and the broader economy
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News
02.5.24
Yahoo Finance
Even some Fed officials are now questioning the Fed's new bank capital rules
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Press Releases
02.5.24
FSF
Press Release: Highlighting Concerns on Basel III Endgame
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Press Releases
02.5.24
FSF
Forum CEO: Analysis Shows Excessive Cost of Capital Proposal
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Resources
02.5.24
U.S. Senate Banking Committee GOP Members
U.S. Senate Committee on Banking, Housing, and Urban Affairs: Basel III Banking GOP Letter
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News
02.5.24
The Bond Buyer
Muni advocates warn of fallout from proposed Basel III capital reforms
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Resources
12.22.23
FSF
What They're Saying About Basel III: December 2023
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Videos
11.28.23
FSF
Campaign video: Another Bill Americans Can’t Afford
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Videos
11.17.23
FSF
Policymakers express concerns over economic impact of Washington's proposed capital regulation plan
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Press Releases
11.14.23
Press Release: New TV ad raises awareness of negative economic consequences of Basel III Endgame for Americans
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Press Releases
10.27.23
Press release: New campaign will raise awareness of negative economic consequences of Basel III Endgame for everyday Americans
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Videos
10.23.23
CNBC
Americans Can't Afford Another Bill campaign pushes back against bank capital requirements hike
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News
10.4.23
American Banker
BankThink Higher bank capital requirements would harm low-income borrowers most
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News
10.4.23
American Banker
FDIC's McKernan questions rationale behind Basel endgame standards
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News
09.14.23
POLITICO
The calls are coming from inside the house: Dems rap Biden bank cops
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Resources
09.1.23
The Urban Institute
Bank Capital Notice of Proposed Rulemaking
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Resources
08.22.23
American Council on Renewable Energy
The Impact of Proposed Bank Regulatory Capital Requirements on Tax Equity Investment in Clean Energy
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Resources
07.25.23
NAACP, National Housing Conference, National Urban League
Housing Groups Letter on Bank Capital
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Resources
05.4.23
FSF
U.S. vs. European Capital Adequacy - The Increasingly Unlevel Playing Field Unfolding in Basel III Finalization
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Resources
11.14.22
FSF
Don’t Paint the House Before Finishing the Roof: Basel III Finalization and the Large Bank Capital Regime
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