Fed’s Bowman recommends Basel III Endgame changes

Federal Reserve Governor Michelle Bowman said she sees a path forward for implementing proposed Basel III Endgame capital rules that addresses concerns with their effectiveness and efficiency.

Details: In a speech in London, Bowman said her recommendations for revising the proposal included addressing redundancy in the capital framework, recalibrating the market risk rule, adopting a more reasonable treatment for non-interest and fee-based income, and reviewing the impact of capital requirements on U.S. Treasury market intermediation and liquidity.

Updates Expected: Fed Chair Jerome Powell in March told Congress that regulators will likely make substantial updates to their Basel III proposal. Powell said there would be “broad and material” changes to the proposal and that regulators might release an entirely new proposal.

Background: The agencies are proposing to apply an enhanced risk-based approach that standardizes risk weights for banking assets for banks with total consolidated assets of $100 billion or more. The proposal would require these institutions to run stricter risk-based capital calculations and would expand accumulated other comprehensive income requirements to the $100 billion asset level.

ICBA Comments: In a comment letter to regulators earlier this year, ICBA said it generally supports the proposal but cautioned regulators that more research is needed to avoid unintended consequences on community banks.