Press Releases

Yesterday, the House Committee on Financial Services held a hearing examining how the Trump Administration’s revised capital proposals, including Basel III, are appropriately right-sized to strike the proper balance between safety and soundness and economic growth. 

On 2026 Proposals Compared to 2023 Basel III Proposal:

Subcommittee on Financial Institutions Subcommittee Chairman Andy Barr (KY-06) said, “Last Congress, this Committee devoted significant time encouraging our banking regulators to get bank capital right. We called for a careful assessment of both the costs and benefits of Basel III finalization and a recognition that banks today hold substantially more – and higher-quality – capital than they did two decades ago. We were clear that the original 2023 proposal lacked sufficient economic analysis, failed to account for overlapping requirements, and risked unnecessary disruptions to essential bank lending and capital markets activities. It is encouraging to see our banking regulators under the Trump Administration address many of these bipartisan concerns and move to a more pro-growth, tailored, and evidence-based approach in their recently released capital proposals. These proposals reduce unnecessary complexity and gold-plating that put U.S. banks at a competitive disadvantage."

On Supporting Market Stability and Economic Growth:

Full Committee Vice Chairman Bill Huizenga (MI-04) said, “American capital markets are the broadest and deepest in the world, and it is important that bank capital requirements promote their proper functioning. The prior administration’s overly punitive proposal would have had significant consequences for banks’ securities underwriting, derivative hedging, securitization, and equity investments in funds. The revised proposal does more to ensure that banks continue their crucial work as intermediaries and that risks flow to those most able to manage them.”

Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence Chairman Bryan Steil (WI-01) questioned witnesses on how the revised capital proposal framework improves on the flawed 2023 version for Americans looking to own a home, to which Mr. Robert D. Broeksmit, President & Chief Executive Officer, Mortgage Bankers Association said, "Well, one of the main improvements as it relates to mortgages in this newer proposal, for which we commend the regulators, is to get rid of this gold plating. The previous proposal had as much as a 40% increase in how much capital a bank would have to hold to keep a loan on its balance sheet. And that's done away with in this proposal. This proposal has also made the capital that you need to retain lower if the borrower has more equity, which makes common sense — if you have a failure, you're not going to have a loss."

Subcommittee on Financial Institutions Chairman Andy Barr (KY-06) asked Mr. Greg Baer, President & Chief Executive Officer, Bank Policy Institute, to outline why  the higher capital requirements under the Biden Administration’s Basel III proposal were counterintuitive and constrain banks’ ability to lend, to which Mr. Baer replied, "There is a cost and the most expensive way for a bank or any other company for that matter, to fund itself is through equity. And that is why most companies try to diminish the amount of equity that they have to hold. Again, as someone who's worked inside a bank, you, the CFO, the corporate folks, they know how much equity costs, they know their cost of capital. And they monitor it and they meet it out to the lines of business that can earn the highest return on that equity. They do not ignore the cost of equity. And of course, if you read any analyst's report, talk to any investor — they're all very focused on this proposal. Under that analysis, they would be completely indifferent because the increase in costs for equity would be matched by a decrease in costs for debt. But everybody operating in the markets, all people who invest in banks, know that's not the case."

Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity Chairman Frank Lucas (OK-03) said, “The Basel re-proposal we're discussing today is a dramatic improvement from the 2023 proposal, and I laud Vice Chair Bowman's hard work to release it less than a year after assuming a role... This proposal ensures capital requirements do not reduce our lending capacity, market liquidity, or other market making activity that banks provide to support the economy. The previous Basel proposal received a record volume of comments expressing concerns over the negative impact it would have had on lending capacity in our banking systems.”

Rep. John Rose (TN-06) questioned witnesses on how increased bank capital requirements could threaten liquidity in agricultural futures markets and harm producers and end users, to which Mr. Reginald Griffith, Global Head of Regulatory Compliance, Louis Dreyfus Company, on behalf of the Commodity Markets Council said, "I think the biggest concern would be that the sector isn't able to fully manage its risks. That's number one. And as bank capital requirements go up, our access to clearing could potentially be limited. So that leads to not only higher prices, but it leads to more risk that's pushed down the food chain. Farmers — I know we don't want banks to go under, but we also don't want farmers to have to hold unnecessary risk. And if the bank capital is overly burdensome, they're going to have to hold a lot more risk than they do today. The other thing that is clear would happen is if costs go up — the large commercials may be able to absorb a little bit of that, but that's going to flow down to farmers. And the margins are already very thin in the farming community. The costs are only going to increase if we choose overly burdensome capital requirements on our banks. I think the 2026 proposal is a nice balance between the two. There are some additional safeguards, but I also think it would be a balance that wouldn't be burdensome on the agriculture community or on farmers."

On How the Revised Proposal Restores Access to Credit:

Subcommittee Chairman on Capital Markets Chairman Ann Wagner (MO-02) said, “The original 2023 Basel III proposal would have had drastic consequences on securitization, which plays a vital role in helping banks manage their balance sheets and making credit, most importantly, credit more affordable and available to constituents who need it to finance a home purchase or perhaps a business.”

Subcommittee on Oversight and Investigations Chairman Dan Meuser (PA-09) said, “A well calibrated capital framework is one of the most important tools we have in ensuring the growth of our nation's economy and protecting small business’ ability to access capital. Thanks to the terrific work of Fed Vice Chair Michelle Bowman, the newly proposed framework seeks to achieve that goal protecting our economy while avoiding overly stringent requirements, that, in the end, restrict lending and hinder growth. The revised Basel III proposal reduces burdensome capital requirements on regional community banks in support of a pro-economic growth framework that avoids the negative effects of the previous proposals that truly would have harmed access to capital for every American.”

Witnesses Echoed the Work of the Committee:

Mr. Baer said, “Contemporaneous finalization of these three proposals would remove almost a decade of uncertainty about Basel implementation in the United States and lift a veil of secrecy from the Federal Reserve’s stress test. Investors will be able to know what a bank’s capital requirement is and project with confidence what it will be in the future — just like investors in any other type of company. For their part, banks will be able to engage in more thoughtful capital and business planning. As a result, banks’ cost of capital will decrease, their ability to serve their customers efficiently will increase and the economy will benefit in an indirect but significant way.”

Mr. Broeksmit said, “I want to step back from the technical language of risk weights and instead briefly tell you what these capital rules mean to a family buying or renting a home. First, let me say clearly the agencies have listened. This new proposal is meaningfully better than the current bank capital framework, and the proposed revisions in 2023 that would have caused serious disruption to both residential and commercial real estate markets. Let me focus on three areas of the proposal where the details will have real consequences for real people. When a bank originates a mortgage and sells it into the secondary market, it often retains the right to collect payments. The mortgage servicing asset, or MSA, that servicing right has value, and it's a key component of how banks price new loans. In 2013, under the first phase of Basel III, regulators raised the risk weight on MSAs from 100% to 250%, with no empirical justification. In practical terms, this took the capital requirement on the value of mortgage servicing from $0.08 on the dollar to $0.20 on the dollar. The result was predictable. Banks looked at that capital cost and walked away from mortgage servicing with their share of single-family servicing falling from 88% in 2012 to 39% today. That's not a market trend. That's a regulatory outcome. Here's why that matters. For borrowers, the value of a servicing right is a direct input into mortgage pricing. When bankers are active and consistent buyers of servicing, that competition drives the value of the MSA, and every increase in servicing value translates directly into lower costs for the borrower. At origination, a 25 basis point increase in servicing value is a 25 basis point reduction in closing costs. That's $1,000 in savings on a $400,000 loan. It's not abstract. It goes right back into the borrower's pocket. MBA strongly supports reducing the MSA risk rate back to 100%.” 

Mr. Griffith said, “We believe the March 2026 capital proposals strike an appropriate balance by strengthening safeguards while preserving market liquidity and clearing capacity. By contrast, the 2023 Basel III endgame proposal we fear would undermine these objectives by increasing costs, reducing clearing capacity, and pushing risk away from transparent, centrally cleared markets. We believe the 2026 proposal better supports the long-term stability and efficiency of agricultural hedging markets.”

Mr. Luigi L. De Ghenghi, Partner, Davis Polk & Wardwell LLP said, “The 2023 proposed rules were issued by the banking agencies with an impact and economic analysis summary that was eight pages long and without the benefit of an extensive data collection effort to measure the potential impact of the proposed rules on affected banking organizations’ RWAs. In contrast, the three 2026 proposed rules include an impact and economic analysis summary that is 95 pages long and that takes into account the results of the data collection effort from 2023 as well as data reported by banking organizations on various regulatory reports through June 2025. The banking agencies’ impact and economic analysis summarizes not only the expected impact of the 2026 proposed rules, but also the cumulative impact of other final or proposed changes to bank capital requirements, such as the final rule modifying the Enhanced Supplementary Leverage Ratio (eSLR) and the proposed changes to various aspects of the Federal Reserve’s stress testing and stress capital buffer framework.”

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