Tilted playing field appears as banks parse US Basel capital cuts

US financial regulators have finalized their proposal for the Basel III regulatory framework, which looks set to cut capital requirements, making US banks more competitive compared with global peers.  

“The Basel III package is broadly in line with the messaging from the regulators. There are pros and cons for banks," said Matthew Bisanz. “Overall, the newly released regulatory package is much better than the 2023 version. Lots of thought has clearly gone into it by the regulators. It is much more tailored to the US banking system, while also being more aligned to the international standards.”

He called the proposal “really good”. Though there is a headline capital reduction of about 4.9% for major banks, “this number doesn’t really reflect the situation,” the lawyer said, adding that the effects would be “more nuanced overall”. 

“For example, for G-Sibs, stress testing changes will increase and decrease their capital requirements for different reasons,” Bisanz said. “Also, for the 10 largest US banks, their capital requirements under the risk-based capital rules will go up by 1.4%.”