Basel III 'Endgame' Capital Reforms Face Significant Opposition

Stakeholders Raise Concerns About Potential Impact on Lending and Economic Growth

The Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corp. proposed changes to bank capital rules in July 2023, known as the Basel III 'endgame' capital reforms, which would significantly increase regulatory capital buffer and minimum capital requirements for banks with over $100 billion in assets.
Federal Reserve Board Gov. Michelle Bowman has expressed concerns about the proposal, suggesting that it may harm the U.S. economy and businesses, and that it should be revised to address known deficiencies and to consider the wide-reaching consequences of capital reform to the U.S. banking industry.
Many stakeholders, including banks, community groups, racial justice advocates, and consumer and low- and moderate-income community advocates, have raised concerns about the proposal, arguing that it could restrict lending to small businesses, homebuyers, and lower-income families, and hurt economic growth.
Federal Reserve Gov. Christopher Waller has suggested that the proposal should be withdrawn and substantially revised, due to the significant opposition it has faced.
Despite the criticism, some financial scholars and investor advocacy groups have expressed support for the proposal, arguing that increased capital buffers would make banks more resilient during economic or financial stress.