CONTACT: Brigid Richelieu
(202) 457-8766
Required Bank Capital Increase Would Far Exceed Government Estimates
Analysis shows capital requirements for the largest U.S. banks would increase 30 percent
Washington, D.C. – Capital requirements for the 8 U.S.-based Global Systemically Important Banks, or GSIBs, would increase 30 percent following implementation of an international capital accord in the United States, the Financial Services Forum, American Bankers Association, Bank Policy Institute, and Securities Industry and Financial Markets Association said in a letter to banking regulators.
The U.S. banking agencies in their Basel 3 Endgame proposal estimated the increase in required capital for the GSIBs plus one other bank would be 19 percent while risk weighted assets under the proposal would increase by 24 percent. An analysis by the Forum found that required capital for the U.S. GSIBs would increase by 30 percent – required capital would rise by approximately 25 percent due to the endgame proposal itself and by roughly an additional 5 percent as a result of increased GSIB surcharges – while risk-weighted assets, which are the basis for risk-based capital requirements, would increase 33 percent.
“These capital and risk-weighted asset increases are markedly higher than those provided in the proposal, demonstrating that the agencies have materially underestimated the proposal’s impact,” the trade associations said in a letter to the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
The banking agencies’ estimates relied on outdated data and were calculated based on the Basel agreement, not on the U.S. proposal, which goes above and beyond the international accord. The Forum used 2023 data in its analysis and considered the impact of the rule as proposed in the United States. Further, the analysis incorporated expected increases in GSIB surcharges.
“The final rule, and any assessment of the proposal’s impact on capital, must be informed by up-to-date data pertaining to the proposal itself, and we believe it must also take into account all components of the agencies’ regulatory capital framework,” the trades said.
The regulators should release the results of its quantitative impact study, which would be based on data due to the banking agencies on January 16, 2024. The agencies then should repropose the rule to give commenters time to consider the impact of the rule in light of the new information.
More detailed information on this data and the broader impacts from the Basel III proposal will be included in the forthcoming comment letters from the trade groups.
Media contacts:
Financial Services Forum
Brigid Richelieu, 202-660-2569
American Bankers Association
Josh Britton, 202-663-7553
Bank Policy Institute
Austin Anton, 202-589-2410
Securities Industry and Financial Markets Association
Lindsay Gilbride, 202-962-7390
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About the Financial Services Forum
The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.
About the American Bankers Association
The American Bankers Association is the voice of the nation’s $23.4 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $18.6 trillion in deposits and extend $12.3 trillion in loans.
About the Bank Policy Institute
The Bank Policy Institute is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.
About the Securities Industry and Financial Markets Association
The Securities Industry and Financial Markets Association is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
Updated January 16, 2024, to reflect updated data