What They’re Saying About Basel III: December 2023

There is a growing coalition of stakeholders from both sides of the aisle concerned about the negative potential impacts of Washington's capital regulation plan—known as Basel III Endgame. Here's what they're saying:

  • An analysis by the Urban Institute found that low to middle-income borrowers, particularly borrowers of color, will bear the brunt of this regulation. "Among other provisions, this proposal would make significant changes in the capital requirements for single-family residential mortgages held in bank portfolios. In particular, the capital charges rise significantly for loans with high loan-to-value (LTV) ratios. Our analysis suggests the proposed capital levels exceed what would be needed even to protect banks from a repeat of the Great Recession. Moreover, the changes—contrary to the intentions of the Community Reinvestment Act (CRA)—would disproportionately disadvantage low- and moderate-income (LMI) borrowers and communities, as well as Black and Hispanic borrowers."
  • David M. Dworkin, president and CEO of the National Housing Conference, highlights the devastating impact Basel III Endgame will have on minority homeownership. "Increasing the capital requirement for loans with higher LTVs could have a devastating impact on efforts to close the homeownership gap for Black, Latino, AAPI, and Native American borrowers. Amidst nationwide efforts by banks to address the homeownership gap and financial institutions adopting Special Purpose Credit Programs to improve racial equity, requiring an unprecedented and unnecessary level of capital for high LTV mortgage loans risks moving the entire industry in the wrong direction. Such a move may limit credit access for borrowers of color."  
  • The American Council on Renewable Energy and over 40 other clean energy advocacy groups warn that higher capital costs will decimate investment in renewable energy projects. "Substantially higher capital costs for banks could significantly increase the costs of clean energy projects and result in far fewer projects being built. Furthermore, carbon reduction goals may not be met, jobs could be lost, manufacturing could be stunted, and equitable access to clean, low-cost energy could be reduced – all of which are inconsistent with the administration’s climate initiatives and the IRA."
  • The NAACP and other community advocacy groups state that implementing Basel III Endgame will have a significant impact on Black homeownership. "Such a significant increase in capital standards will lead to reduced credit availability for all types of lending and undermine economic growth. If these standards are adopted, they 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." 
  • Third Way highlights the importance of access to credit for small businesses, which will be jeopardized if Basel III Endgame is not implemented. "Small business owners face numerous barriers to accessing capital and need more opportunities to thrive. As it considers comments on the new proposed capital requirements to keep our banking system safe, we urge the Federal Reserve and banking regulators to pay particular attention to credit access and affordability for small and minority-owned businesses."  
  • The U.S. Chamber of Commerce, in partnership with 18 other business trade groups, emphasizes the concern that small businesses have with Basel III Endgame. "The proposed capital increase is without merit given the U.S. banking system is more than adequately capitalized and continues to demonstrate its resilience. Banking regulators should not advance a capital increase that hamstrings U.S. businesses and make an already challenging economic environment worse for working Americans… Businesses are concerned about the indirect costs that would be imposed on them and the overall economy because of the Basel III Endgame proposed regulations given it will become more expensive to access the banking system and capital markets."