Citing Inadequate Economic Analysis, Scott, Colleagues Renew Push for Regulators to Abandon Basel III Endgame
Washington, D.C. – Ranking Member Tim Scott (R-S.C.) led every Republican on the Senate Committee on Banking, Housing, and Urban Affairs in continuing their call for financial regulators to withdraw the Basel III Endgame proposal to raise bank capital requirements. As the public comment period for the proposed rule closed, the members sent a letter to the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency highlighting the agencies’ continued failure to provide a thorough economic analysis justifying the proposal’s merits and to address concerns on the proposal’s outsized impact on access to credit and important financial services for those who need it most. Joining Ranking Member Scott on the letter are Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), Thom Tillis (R-N.C.), John Kennedy (R-La.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), JD Vance (R-Ohio), Katie Boyd Britt (R-Ala.), Kevin Cramer (R-N.D.), and Steve Daines (R-Mont.).
Ranking Member Scott and his colleagues wrote, “As we noted in our November 12, 2023, letter to each of you, your agencies have still yet to justify the need for this proposal with any sufficient economic analysis or proof that the banking system is currently under capitalized. Since we last wrote to you, our concerns have not been mitigated, and testimony from the November 14 and December 6, 2023, Senate Banking Committee hearings has only deepened our resolve that this proposal is flawed and must be withdrawn.”
The senators continued, “Following the November 14 hearing, on December 6, 2023, we heard testimony from the CEOs of the eight largest banks in this nation, which largely discussed how the proposal would hinder economic growth and reduce lending to households and businesses…During that hearing and since, we continue to hear particularly concerning testimonies about the outsized negative impacts the proposal would have on minority communities, especially LMI and minority borrowers.”
“As backdrop to all of this, the Federal Reserve seemingly acknowledged that it did not appropriately consider the impacts of the proposal when it began an additional data collection in October 2023…How can we as legislators, or any of the American public, be asked to weigh in on a proposal, the effects of which the proposal’s authors do not yet fully comprehend?...Given that the public comment period for the proposal closed today, it is unclear how the public may be able to weigh in on the results of the data collection and whether adequate data will be released to allow for independent analysis.”
To read the full letter, click here.
Background:
Last March, Ranking Member Scott led Banking Committee Republicans in expressing concern over the undefined nature of Federal Reserve Vice Chair for Supervision Michael Barr’s “holistic” review of capital, emphasizing that capital requirements must be risk-based and tailored to an institution’s activity, size, and complexity. During the Federal Reserve’s semi-annual hearing on monetary policy in June, Ranking Member Scott raised concerns over the Federal Reserve’s plans to raise capital requirements directly to Federal Reserve Chair Jerome Powell.
In November, Ranking Member Scott led nearly 80 percent of the Senate Republican conference – including Republican Leader Mitch McConnell and every Republican member of the Senate Banking Committee – in urging the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency to withdraw the Basel III Endgame proposal.
At the committee’s December hearing with the CEOs of America’s largest banks, Ranking Member Scott questioned the bank leaders about the downstream effects of the unprecedented number of new regulations and proposals the Biden administration’s financial regulators have put forward this past year, including the Basel III Endgame proposal. Ranking Member Scott pressed the witnesses on how these proposals will affect their ability to provide access to credit and important financial services to all Americans.
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