House Financial Services Republicans urge Fed to withdraw and re-propose Basel III rule

Republicans on the House Financial Services Committee are asking Federal Reserve Board Chairman Jerome Powell to withdraw the “misguided” Basel III Endgame rule and submit an entirely new proposal.

The proposal is designed to strengthen the regulation, supervision, and risk management of banks, while potentially increasing the capital requirements for large banks.

The committee Republicans said the proposal lacks the necessary evidence and analysis to completely overturn the current methods used for calculating risk-based capital requirements.

If finalized in its current form, the Republicans said the proposal would represent the most significant changes to the bank regulatory framework since the Dodd-Frank Act.

“We are concerned by ongoing reports that the Federal Reserve will seek an as-yet undefined ‘partial preproposal,’ and that ‘[t]here will be additional changes that will be made that won’t be re-proposed.’ Let us be clear, the current proposal contains such widespread structural and fatal flaws that a complete withdrawal and re-proposal in its entirety is the only solution,” the committee Republicans, led by Chair Rep. Patrick McHenry (R-NC), wrote in a letter to Powell.

They added that fixing the current proposal’s flaws will require broad changes, thereby requiring re-proposal.

“We appreciate the Federal Reserve Board’s efforts to meaningfully engage with the public in its rulemaking process. We strongly encourage the Board to avoid potential litigation and reputational risks by withdrawing and re-proposing in the entirety,” they concluded.

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