Federal Reserve Chairman Jerome Powell told Congress that regulators should issue a revised Basel III Endgame proposal.

Details: Testifying before the Senate Banking Committee, Powell said:

  • Fed Vice Chair for Supervision Michael Barr and other federal banking regulators have made “quite a bit of progress” on potential changes to the original proposal.

  • He and other members of the Fed board believe regulators should issue a new proposal given the extent of the changes, and they are working with the FDIC and OCC to reach agreement on the need for a new proposal.

Background: The original proposal would apply an enhanced risk-based approach for banks with $100 billion or more in total consolidated assets. The proposal would subject these institutions to run stricter risk-based capital calculations and require them to run their unrealized gains and losses through accumulated other comprehensive income, or AOCI.

Debate Over Updates: Powell in March told Congress that regulators will likely make substantial updates to the Basel III proposal, and Fed Governor Michelle Bowman last month laid out her recommendations for revising the proposal to make it more effective and efficient.

ICBA View: In a comment letter to regulators earlier this year, ICBA said it generally supports the proposal but cautioned regulators that more research is needed to avoid unintended consequences on community banks.