On July 27, 2023, the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a notice of proposed rulemaking, calling for comment on a proposal to exercise the final components of the Basel III Capital Accords, often referred to as the Basel III endgame.
This initiative followed the fallout from the failure of Silicon Valley Bank (SVB). The main target of these proposed rules are banking organizations that carry $100 billion or more in assets. The banking regulators aim to employ a more comprehensive set of capital requirements for these major financial institutions with the goal of reducing systemic risk and enhancing the resilience of the banking system, as a whole.
Named after the Basel Committee on Banking Supervision, the Basel III Capital Accords were developed to address the deficiencies in financial regulation revealed by the financial crisis of 2007-08. Among other measures, Basel III establishes tougher capital standards through more restrictive capital definitions, higher risk-weighted assets, the introduction of a new leverage ratio, and two new capital buffers (the capital conservation buffer and the countercyclical buffer).
The proposed rules by the Federal agencies extend these measures, promising a stronger, safer, and more reliable banking industry for all stakeholders. Further consultation on this rulemaking proposal is currently underway, with financial industry professionals and interested parties invited to weigh in.
As informed legal professionals navigating this dynamic regulatory landscape, it’s imperative we stay abreast of these developments and implications for our respective organizations. You can continue to follow the Basel III endgame discussions and developments here.