Wall Street’s biggest lobbying groups sent a letter to US banking regulators on June 17, asking them to pare back the Basel III “Endgame” capital rules even further than a March proposal already attempted. The core argument: the current framework could jack up capital requirements for trading activities by 30% to 89%, which would make it significantly more expensive for banks to do things like, well, trade US Treasuries.
The letter landed on the desks of three agencies: the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). Its timing was not subtle, arriving just one day before the comment period for the latest round of proposals officially closed on June 18.
What Basel Endgame actually means
Think of capital requirements as the financial padding banks are forced to keep on hand in case things go sideways. Basel III Endgame is the final phase of international banking rules designed after the 2008 financial crisis to prevent banks from over-leveraging themselves into oblivion.
US regulators did try to address some of these concerns back on March 19, when they released revised proposals designed to lower the overall capital burden on large banks by roughly 4.8% to 5%. That was supposed to be the olive branch. Wall Street is now saying the olive branch needs to be bigger.
