On September 25, the U.S. House Financial Services Committee
held a
hearing to scrutinize the Basel III Endgame proposal, which has faced significant criticism from various stakeholders. Rep. Andy Barr (R-KY) opened the hearing by highlighting that 97 percent of the comments on the proposal were negative, with 86 percent coming from outside the banking system. He emphasized that the proposal, initially a reaction to the March 2023 bank issues, could harm mortgage markets and tax credits.
Rep. Bill Foster (D-IL) countered by recalling the 2008 financial crisis and the importance of adequate capital requirements to prevent systemic failures. He noted that the Basel III recommendations need to balance capital requirements to ensure financial stability without stifling economic growth. Foster expressed concerns about the premature nature of the hearing, given that the committee and the public had not yet seen the text of the updated proposal.
The Fed’s Vice Chair for Supervision, Michael Barr, discussed a few changes to the Basel III Endgame proposal in a speech earlier this month. As previously covered by InfoBytes, Barr focused on how the rules may no longer apply to banks with assets between $100 billion and $250 billion. Proposed revisions to the globally-systematically important bank surcharge aim to address issues such as “window dressing” and “cliff effects.”
Lawmakers and witnesses debated the adequacy of current capital requirements, the potential impact of the Basel III Endgame proposal on various sectors, and the need for a more data-driven and transparent approach to rulemaking. Concerns were raised about potential negative effects on small businesses and consumers, and the importance of maintaining U.S. competitiveness in global markets. The hearing underscored the need for a careful and measured approach to regulatory changes.
