Lafayette Reporter

Senators John Kennedy (R-La.) and Tim Scott (R-S.C.), along with all Senate Banking Republicans, are calling on regulators to withdraw the Basel III Endgame Proposal. The proposal, which aims to increase bank capital requirements, has raised concerns among the senators regarding its potential impact on various aspects of the economy.

In a letter addressed to regulators, the senators expressed their reservations about the proposal, highlighting its potential consequences on affordable housing, mortgage lending, small business lending, and consumer lending. They also emphasized that the proposal could limit access to credit cards and home equity lines of credit, putting U.S. companies at a disadvantage compared to their foreign competitors.

The senators pointed out that regulators have yet to provide sufficient economic analysis or evidence that the banking system is currently undercapitalized to justify the need for the proposal. Testimony from Senate Banking Committee hearings further strengthened their belief that the proposal is flawed and should be withdrawn.

During these hearings, the CEOs of the eight largest banks in the country testified about the adverse impact the proposal would have on economic growth and lending to households and businesses. Of particular concern were the potential negative effects on minority communities, especially low- to moderate-income and minority borrowers.

Adding to the senators' concerns, the Federal Reserve acknowledged that it did not adequately consider the impacts of the proposal, leading them to initiate additional data collection in October 2023. This raises questions about the proposal's authors' understanding of its effects and the ability of legislators and the public to properly evaluate it.

The Basel III Endgame Proposal stems from revisions to international capital standards issued by the Basel Committee on Banking Supervision in Switzerland in response to the 2007-2009 financial crisis. The Federal Reserve, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation jointly issued a notice of proposed rulemaking in July, outlining the revisions to bank capital requirements.

The proposed rule is intended to apply to banks with assets over $100 billion, primarily impacting the largest banks in the United States and potentially altering their lending and trading practices.

Joining Senators Kennedy and Scott in signing the letter were Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), Thom Tillis (R-N.C.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), J.D. Vance (R-Ohio), Katie Britt (R-Ala.), Kevin Cramer (R-N.D.), and Steve Daines (R-Mont.).

The senators' letter can be accessed in its entirety for further details on their concerns and arguments against the Basel III Endgame Proposal.