Those in favour see it as vital to shore up the US banking system. Those against it call it a “nightmare” that could devastate lending to Americans. In blistering opening remarks in the US Senate Committee on Banking, Housing and Urban Affairs, ranking member Senator Tim Scott argued that it could even threaten the “American dream”.
It is the US banking regulatory agencies’ final interpretation of the 2017 Basel III Accords, dubbed ‘Basel Endgame’. It is a set of rule changes that are both extensive (running to some 316 pages in the Federal Register) and highly technical, but at its core lies the requirement for banks to hold capital reserves relative to the riskiness of their business. Funding that comes from shareholders (equity) rather than from depositors or bondholders (borrowing). The bottom line is increased capital. Estimates suggest that, under Basel Endgame, the largest US banks will need an additional $2 of capital for every $100 of risk-weighted assets.
