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Open Board meeting on Basel III, GSIB surcharge, & standardized approach proposals, March 19, 2026
Summary
Proposals discussed aim to revise capital requirements for major banks, focusing on the GSIB surcharge and Basel III components. These updates seek to enhance the banking system's resilience and ensure capital requirements reflect actual risks.
The proposals intend to modernize the capital framework for banks, enhancing risk sensitivity and streamlining requirements. This is essential for banks to absorb losses while supporting economic activities.
Proposed changes to capital requirements aim to align regulations with the risks associated with different banks, particularly lowering requirements for larger institutions. These adjustments are designed to enhance the banking system's resilience while maintaining safety and soundness.
The cumulative impact of the proposals is expected to lower capital requirements for the largest banks by approximately 4.8%, which raises concerns about the potential for increased risk-taking and reduced credit availability.
Perspectives
Summary of proposals and discussions regarding capital requirements for banks.
Supporters of the Proposals
- Advocate for modernizing capital requirements to reflect actual risks
- Emphasize the need for banks to maintain capacity to absorb losses
- Highlight the importance of aligning U.S. regulations with international standards
- Argue that the proposals will enhance the banking systems resilience
- Support targeted adjustments to reduce unnecessary regulatory burdens
Critics of the Proposals
- Claim that significant reductions in capital requirements are unnecessary and unwise
- Highlight concerns about the potential for increased reliance on short-term wholesale funding
- Question the adequacy of the proposed measures to capture systemic risks
Neutral / Shared
- Acknowledge the need for regular reexamination of regulatory frameworks
- Recognize the complexity of balancing capital requirements with economic growth
- Note the importance of public feedback in shaping final proposals
Metrics
capital_requirements
the final components of the Basel III agreement
proposals to modernize capital requirements
Aligning capital requirements with risks is crucial for financial stability.
the first proposal would implement the final components of the Basel III agreement for the largest banks.
capital_surcharge
the capital search charge for systemic risk is measured
improving measurement of systemic risk
Accurate measurement is vital for assessing the risks posed by large banks.
the third would improve how the capital search charge for systemic risk is measured.
capital requirements
2.4%
reduction in common equity tier-1 capital requirements for the largest banks
A decrease in capital requirements could impact banks' ability to absorb losses.
the proposals would reduce common equity tier-1 capital requirements for these banks by 2.4%
capital requirements
3%
decrease in capital requirements for other large banks
Lower capital requirements may enhance lending capacity but could also increase risk exposure.
the standardized approach proposal would decrease capital requirements for other large banks by 3%
capital_requirements
4.8%
capital requirement reduction for the largest banks
This reduction could impact the overall risk profile of the banking sector.
lower capital requirements for the largest banks by 4.8%
short-term_wholesale_funding_weight
20%
new weight for short-term wholesale funding in G-SIB surcharge
Adjusting this weight reflects a more accurate assessment of systemic risk.
the weight of the surcharge component that accounts for risk associated with short-term wholesale funding, would decrease from the current level of about 30% down to 20%
short-term_wholesale_funding_stability
20%
stability of short-term wholesale funding among G-SIBs
Indicates that the proposed changes are based on current funding realities.
the reliance on short-term wholesale funding of G-SIP's has actually been stable around 20%
capital
robust level of capital
current capital levels of banks
Strong capital levels are crucial for mitigating systemic risks.
Overall, banks currently maintain robust level of capital
Key entities
Timeline highlights
00:00–05:00
The meeting addressed proposals to revise capital requirements for major banks, focusing on the GSIB surcharge and Basel III components. These updates aim to enhance the banking system's resilience and ensure capital requirements reflect actual risks.
- The meeting welcomed both in-person and virtual participants, including board members and officials, and focused on proposals to revise capital requirements for major banks and adjust the GSIB surcharge
- The chair highlighted the necessity for regulatory updates nearly twenty years post-global financial crisis to ensure rules effectively address current risks
- Three proposals aim to modernize capital requirements, including finalizing components of the Basel III agreement to better align them with risks from traditional lending
- The proposals seek to enhance the measurement of the capital surcharge for systemic risk, which is vital for strengthening the banking systems resilience against regulatory burdens
- Board members recognized the complexity of the proposals and the collaborative effort in their development, demonstrating a commitment to refining banking regulations
- The anticipated changes are designed to streamline the risk-based capital framework and ensure capital requirements reflect actual risks, crucial for the financial systems safety
05:00–10:00
The proposals aim to modernize the capital framework for banks, enhancing risk sensitivity and streamlining requirements. This is essential for banks to absorb losses while supporting economic activities.
- The proposals aim to modernize the capital framework for banks, enhancing risk sensitivity and streamlining requirements. This is essential for banks to absorb losses while supporting economic activities
- By eliminating duplicative capital requirements, the proposals align regulations with actual risks. This alignment is expected to ease burdens on traditional lending, promoting banking sector stability
- The Basel III proposal focuses on the largest banks, simplifying compliance with a unified approach to risk-based capital requirements. This change is intended to bolster the banking systems overall resilience
- Updated capital requirements for smaller banks will better reflect risks tied to traditional lending. This adjustment is crucial for maintaining the essential role these banks play in the economy
- The proposals aim to prevent the migration of traditional lending outside the regulated banking sector. Reducing incentives for such migration will help maintain the integrity of the financial system
- These reforms represent a significant step towards fulfilling the U.S. commitment to implement the 2017 Basel III agreement
10:00–15:00
The Basel III proposal aims to enhance risk sensitivity in capital requirements for large banks by streamlining compliance methods and updating systemic risk measurements. Proposed changes are expected to modestly lower capital requirements while ensuring banks retain strong loss-absorbing capital levels.
- The Basel III proposal enhances risk sensitivity in capital requirements for large banks by streamlining compliance methods, ensuring that capital levels accurately reflect associated risks
- Revisions to operational and market risk requirements will counterbalance previous stress-testing changes, maintaining stability in overall capital levels essential for economic support
- The G-SIB surcharge proposal aims to refine systemic risk measurement by updating indicators to align with current economic conditions, ensuring relevance in risk assessment
- The standardized approach will reduce capital requirements for traditional lending, increasing banks capacity for mortgage lending and promoting growth within the regulated sector
- Eliminating the deduction of mortgage servicing assets from regulatory capital will simplify capital calculations, enhancing banks ability to absorb unexpected losses and bolstering financial stability
- Overall, the proposed changes are expected to modestly lower capital requirements for the largest banks while ensuring they retain strong loss-absorbing capital levels, crucial for a resilient banking sector
15:00–20:00
The proposed changes to capital requirements aim to align regulations with the risks associated with different banks, particularly lowering requirements for larger institutions. These adjustments are designed to enhance the banking system's resilience while maintaining safety and soundness.
- The proposed capital requirement changes aim to align regulations with the risks of different banks, streamlining compliance based on institutional size and complexity
- For the largest banks, the proposals would lower capital requirements by 4.8%, which is expected to maintain their safety and soundness due to their strong capital positions
- Revising the G-SIB surcharge reflects a new approach to measuring systemic risk, particularly by adjusting the weight of short-term wholesale funding to 20% for better accuracy
- The stability of short-term wholesale funding among G-SIBs counters concerns about increasing reliance, indicating that the proposed changes are grounded in current funding realities
- The standardized approach aims to improve risk sensitivity for traditional lending, particularly for smaller banks, by reducing risk weights to enhance mortgage lending capacity
- A five-year phase-in period for banks with significant assets is included to ease the transition to new capital requirements, allowing banks to adjust without financial strain
20:00–25:00
Proposed capital requirement reductions aim to align with actual risks faced by banks, enhancing stability without significantly increasing failure risks. Current strong capital levels are expected to mitigate potential systemic risks while revisions to the G-SIB surcharge will better reflect reliance on short-term wholesale funding.
- The proposed capital requirement reductions aim to better match the actual risks banks face, enhancing overall banking stability without significantly increasing failure risks
- Despite concerns about lowering capital requirements, current strong capital levels are expected to mitigate potential systemic risks
- Revisions to the G-SIB surcharge will more accurately reflect reliance on short-term wholesale funding, addressing previous mismatches in its assessment
- The proposals shift the measurement of short-term wholesale funding from a percentage of risk-weighted assets to a dollar-based approach for clearer insights into funding reliance
- Discussions continue on balancing international standards like Basel III with necessary adjustments for U.S. banking conditions
- The proposals emphasize maintaining high capital standards to ensure the banking systems resilience against economic stresses
25:00–30:00
The proposed capital framework aims to support large banks while maintaining overall banking stability through adjustments focused on operational risk. Expected reductions in capital requirements for lending are designed to enhance credit access for low and moderate income households and small businesses.
- The proposed capital framework is under evaluation to ensure it supports large banks while maintaining overall banking stability
- Adjustments to the Basel framework focus on operational risk for larger banks, ensuring risk assessment models are effective
- Expected reductions in capital requirements for lending could boost credit access for low and moderate income households
- Removing certain capital deductions for mortgage servicing assets may encourage banks to increase mortgage lending to low and moderate income borrowers
- Revised requirements for investment-grade borrowers aim to enhance small business lending by easing listing criteria for securities
- The proposals seek to align capital requirements with risks while ensuring the financial system remains resilient during economic stress