PYMNTS-MonitorEdge-May-2024

FDIC Vice Chairman Travis Hill: Basel III Endgame Needs Re-Proposal

The Basel III Endgame proposal requires “broad and material changes,” and a re-proposal is necessary, Federal Deposit Insurance Corp. (FDIC) Vice Chairman Travis Hill said Wednesday (July 24).

Speaking at an American Enterprise Institute event covering bank regulatory and resolution issues, Hill said that the proposal “lacked appreciation for its real-world impacts,” according to remarks posted on the FDIC’s website.

Because of the complexity of the changes, the public should be given an opportunity to provide feedback on what the relevant agencies are considering, Hill said.

In addition, because everything in the framework is related, the complete rule should be put forward for feedback at once, Hill said.

“For example, commenters might react differently to certain changes to the operational risk framework if they know the agencies plan to adopt other changes to the credit risk framework (and vice versa), given that both frameworks impact the capital charge associated with the same exposures.”

Hill also suggested that any re-proposal should be issued jointly by all three banking agencies.

“For just one agency to re-propose — but with an expectation that a future final rule will be issued jointly by the three agencies — would be unprecedented, sow confusion and lead to a number of practical and legal questions,” Hill said.

The Basel III Endgame proposal has come under fire since it was announced.

In March, House Financial Services Committee Chairman Patrick McHenry, R-N.C., said that the proposal and other projects threaten to give global governance bodies authority over American financial regulation and to weaken the country’s standing on the global stage.

McHenry said the Basel III Endgame proposal is “the most glaring example” of federal banking agencies taking cues from global bodies and that its proposed capital requirements would impact families, communities and small businesses.

In October 2023, J.P. Morgan Chase & Co. and Citigroup expressed concerns that, if implemented without revisions, the proposed capital rules that are part of the Basel III changes could affect their ability to engage in stock buyback and investments.

If implemented as written, J.P. Morgan Chase & Co. estimated that it would need to stockpile 25% more capital, while Citigroup said it would need to reassess its equity investments.

PYMNTS-MonitorEdge-May-2024