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Bank Capital

Capital is the financial cushion that protects banks and their customers from potential losses, and ABA supports strong bank capital requirements, but excessive capital requirements can hinder lending and growth. Regulators themselves have consistently concluded, and stress tests have demonstrated, that the U.S. banking system remains well capitalized. ABA seeks to promote banks’ access to the capital they need to support their communities while also advocating for capital requirements to be tailored to each bank’s risk and business model.

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Background

On July 27, 2023, the FDIC, Federal Reserve and OCC proposed new capital requirements for banks with more than $100 billion in assets. The proposal would implement the so-called "Basel III endgame" standards while eliminating the practice of relying on banks’ internal risk models. If implemented, the new rules would go into effect over three years starting on July 1, 2025. Public comments on the proposal are due Nov. 30. ABA opposes these requirements.

ABA Viewpoint: Basel III Fact-Check

Top regulators have put forward some dangerous misconceptions in their attempts to justify the Basel III endgame rule.

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ABA Viewpoint on Capital Standards

Global cooperation on financial regulatory issues is valuable and important. When these global exercises stray into creating standards that are legally binding on U.S. firms and their customers, problems of accountability and transparency arise.

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Real World Impact: New Capital Requirements Could Make It Harder to Get a Mortgage

ABA, other trade associations, and advocacy groups including the NAACP and the National Urban League are raising concerns that higher capital requirements will make it harder for banks to offer mortgages, particularly to first-time homebuyers. Regulators must carefully consider these implications before moving forward with a final rule.

If these standards are adopted, they will have a devastating impact on our efforts to increase Black homeownership and disadvantage all first-time, and, in particular, first-generation homebuyers who do not have the benefit of multi-generational wealth or higher than average incomes.”

Housing Groups Letter (July 24, 2023)

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Video

Clip: Bipartisan Policy Center panel

ABA Senior Vice President Hugh Carney spoke at a panel discussion on bank capital standards, following remarks by Fed Vice Chair for Supervision Michael Barr on the Basel III endgame proposal.

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What Others Are Saying

“The federal banking system remains healthy…Bank financial conditions and capital levels have been sound for several years and bank liquidity levels have been strong, supporting increases in loan demand, especially in consumer lending.”

Michael Hsu
Acting Comptroller of the Currency
Written Testimony Before the Committee on Financial Services (March 12, 2023)

“The American banking system is really safe and well-capitalized, it's resilient."

Janet Yellen
Treasury Secretary
Face The Nation Transcript (March 12, 2023)

“Our banking system is sound and resilient, with strong capital and liquidity.”

Michael Barr
Federal Reserve Vice Chair for Supervision
Statement before the Committee on Financial Services (March 29, 2023)

“As of the fourth quarter of 2022, banks in the aggregate were well capitalized, especially U.S. global systemically important banks (G-SIBs)."

Federal Reserve Board
Financial Stability Report (May 8, 2023)

The more regulators try to punish big banks, the more they punish their competitors—and Americans who will ultimately pay for blunderbuss regulation one way or another.”

Wall Street Journal editorial board
Wall Street Journal (August 9, 2023)

“Dodd-Frank regulators are poised to squeeze the wrong banks for the wrong reasons, and working families and small businesses will likely pay the price.”

Jeb Hensarling and Michael Solon
Wall Street Journal (June 22, 2023)

“Large banks are well positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession."

Federal Reserve Board
Press Release (June 28, 2023)

“I don't think the solution is to pile on more prescriptive regulation or otherwise try to push responsible risk-taking out of the banking system.”

Jonathan McKernan
FDIC Board Member
Speech (October 4, 2023)

“The result will be some combination of higher prices for consumers, less availability of products and services, migration of U.S. activities out of the regulated banking sector, migration of international activities out of U.S. banks, and more fragile financial markets.”

Travis Hill
FDIC Vice Chairman
Speech (July 27, 2023)

“U.S. and global regulators raised large bank capital requirements significantly in the wake of the global financial crisis. While there could be benefits of still higher capital, as always we must also consider the potential costs.”

Jerome Powell
Federal Reserve Chair
Press Release (July 27, 2023)

“I believe that today’s Basel III proposal will increase the cost of credit and impede market functioning without clear benefits to the resiliency of the financial system.”

Christopher J. Waller
Federal Reserve Governor

X, formerly Twitter (July 27, 2023)

“The proposal should be replaced with one based on sound, objective analysis supported by data, not one plagued by politics.”

Letter from House Financial Services Committee Republicans to Regulators (September 13, 2023)

“The regulators are asking Congress to raise capital requirements on their loans. This punishes the healthy banks, not the lenders that are poorly managed.”

Stephen Moore
National Review Online (October 16, 2023)

“During a time of economic uncertainty, we should not pursue an agenda that will cut Americans off from needed financial services like loans and mortgages.”

Mario H. Lopez
President, Hispanic Leadership Fund
American Banker (October 4, 2023)

“In my view, the regulation in this case is a quelching effect on access to capital…As a small business owner myself I have felt the struggle of being able to land a contract but then not fully service it because I didn’t have access to capital.”

Rep. Steven Horsford (D, NV-04)
Punchbowl News event (October 24, 2023)

“These [Basel III] requirements would fundamentally change the policy of the U.S. banking system. Yet, Congress has very little insight into the basis of such policy changes.”

Patrick McHenry (R, NC-10) and Andy Barr (R, KY-06)
Letter to GAO (October 20, 2023)

“Ensuring reliable and affordable access to capital for small businesses is non-negotiable for a balanced economy….The last thing we need is for the cost of capital to spike for Main Street, limiting access and adding more economic pressures that strain small business owners and workers.”

Rep. Dan Meuser (R, PA-09)
Press Release (October 26, 2023)

“[Basel III is] an incomplete document in ways that are legally very consequential…This document is not one step away from a final rule – it requires much more explanation.”

Former Labor Secretary Eugene Scalia
Capitol Account (October 25, 2023)

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Capital Regulatory Proposals

Our Experts

Hu Benton

Hu Benton

Senior Vice President & Policy Counsel

Regulatory Policy

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Hugh Carney

Hugh Carney

Senior Vice President, Prudential Regulation & Asset Management

Regulatory Policy

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