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The pushback highlighted the ongoing debate between regulatory oversight and economic growth in the banking sector.
Dozens of lawmakers — some of whose campaigns have received financial support from bank PACs and executives — raised concerns about a major regulatory proposal designed to improve bank stability, arguing it could potentially impact small businesses and bank stock buybacks and dividends.
Last summer, the Federal Reserve, the Office of the Comptroller of the Currency, and the
Federal Deposit Insurance Corporation announced the Basel III Endgame proposal, which is the final iteration requiring regulators worldwide to apply capital standards developed by the Basel Committee on Banking Supervision after the Global Economic Crisis in 2008.
The proposal reportedly includes a number of capital, leverage, and liquidity requirements that regulators have worked to implement many of those standards for years. Regulators have said the proposal would apply to banks with more than $100 billion in assets.
The pushback highlighted the ongoing debate between regulatory oversight and economic growth in the banking sector.
Sludge reported regulators who created the proposal estimated that large banks would see a 16% increase in common equity tier 1 capital requirements. Estimates from Bloomberg Intelligence suggest the proposal could limit banks' stock buybacks and dividends until 2025.
The Bank Policy Institute published an analysis in September 2023, suggesting “Congress must urge the Federal Reserve and other banking regulators to withdraw this problematic proposal.”
The institute, along with the American Bankers Association and the U.S. Chamber of Commerce, said in a September 12 letter that the proposal should be re-drafted and proposed again because it “repeatedly relies on data and analyses that the agencies have not made available to the public.”
House Financial Services Committee Chairman Rep. Patrick McHenry (R-N.C.) sent a letter to regulators criticizing the Basel III proposal for its “opaque” process and analysis whale calling for its withdrawal and replacement.
“The proposal should be replaced with one based on sound, objective analysis supported by data, not one plagued by politics,” McHenry and 28 Republican co-signers said in a September 13 letter.
Senate Republicans, including South Carolina Sen. Tim Scott, joined 38 other GOP lawmakers, who called on the withdrawal of the proposal, urging them to “operate in a more transparent and justified manner.”
Virginia Democratic Sen. Mark Warner said during a hearing in November 2023 that the proposal could create a portion of a “perfect storm” of economic burdens.
"This may actually be the time when—as we've seen from some of the civil rights organizations—[there are] real concerns about that lack of lending in the mortgage field."
Federal Reserve Chairman Jerome Powell reportedly said in early March that the central bank and other regulators would make “broad material changes” to the proposal after hearing the concerns from lawmakers and industry groups.
"I’ll add that I’m confident that the final product will be one that has broad support at the Fed and in the broader world," told the House Financial Services Committee.