U.S. Federal Reserve confirms July 27 meeting on Basel III endgame capital proposals for banks

By Steve Gelsi

Basel III endgame proposal goes to full vote by the Federal Reserve Board as regulators look to strengthen the financial system

The Federal Reserve Board has scheduled a July 27 open meeting to air proposed rules to implement the Basel III endgame agreement for large banks, as well as capital surcharges for the largest and most complex banks.

The move by the Fed late Monday comes after reports last week of the gathering by Federal banking regulators to bring the country's rules in line with the international Basel III accords put into place in the wake of the Global Financial Crisis of 2008.

The version may include rule changes around residential mortgage capital requirements for larger banks that may go beyond measures already in place in other countries, as reported by Bloomberg.

TD Cowen analyst Jaret Seiberg said it's expected that the Fed will require capital proposals averaging 200 basis points, or 2%, for banks, although it will vary depending on the bank.

Other forecasted changes by the Fed include how regional banks handle unrealized gains and losses on their available-for-sale (AVS) securities.

The Fed's Basel III endgame proposal will include AFS capital treatment for all banks with at least $100 billion of assets, Seiberg said.

The meeting comes after Michael S. Barr, vice chair for supervision at the U.S. Federal Reserve, said on July 10 he's leading a multiyear effort to increase capital requirements for banks in the wake of three bank failures earlier this year.

Bank industry proponents have said that many such changes are not necessary and that they will raise the cost of borrowing for consumers and business owners.

Still to come on the regulatory front, the Federal Reserve is also working on changes to its annual stress test, which is expected in the coming weeks, Seiberg said.

Also read:Fed's Michael Barr proposes new capital requirements for banks with $100 billion or more in assets

-Steve Gelsi

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07-21-23 0800ET

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