Senate Banking Committee Raises Concerns Around the Basel III Endgame Proposal

Yesterday, the Senate Banking, Housing and Urban Affairs Committee held a hearing on “Annual
Oversight of Wall Street Firms,” which centered around the Basel III Endgame Proposal. ACSA recently signed onto a letter stating our opposition to the proposal.

Republican Members and witnesses alike generally stated that the proposal’s capital requirement increases will create a burdensome regulatory environment for the American financial system. Republican Members raised concerns that the proposal will reduce banks’ ability to lend to the public and small businesses, negatively impact farmers’ ability to hedge their risks efficiently in derivatives markets, and potentially affect Treasury market liquidity.

Witnesses highlighted the redundancy of the Basel III proposal, saying the banking system is in good health as demonstrated by the numerous stress tests their banks have passed. Witnesses generally clarified that increased capital requirements will limit their ability to engage in public lending and discussed how the increased capital requirements will make hedging more expensive for American farmers. Witnesses said Basel III will put the U.S. financial system at a competitive disadvantage on a global scale.

Democrat Members reasoned that recent bank failures indicate a need to reevaluate our capital requirements and that banks’ negative reaction to increased capital requirements is an overreaction. Most Democrats did not question witnesses on the Basel III proposal specifically, and instead raised issues as to housing affordability for low-income and marginalized communities, AI, and cryptocurrency.

More on the hearing here.