Dear Members of the Board,
The U.S. Chamber of Commerce ("the Chamber") is concerned with the Board of Governors of the Federal Reserve System’s (“FRB”) quantitative impact study (“QIS”) that will inform the joint proposed rulemaking entitled Regulatory Capital Rule: Large Banking Organizations and Banking Organizations With Significant Trading Activity, commonly referred to as “Basel III Endgame.” The Chamber has serious concerns about the process and transparency of this rulemaking, especially given the failure to produce a timely and credible quantitative impact study to justify the proposed increase in capital requirements.
As a threshold matter, in order to have a procedurally effective and useful comment period, the agencies generally must identify, make available, and explain the data, studies, analysis, assumptions, and methodology underlying a proposed rule. The failure to do so prevents meaningful public commentary and is a serious procedural failure.
Here, the Basel III Endgame proposal was released on July 27, 2023. Immediately following the proposal’s release, it was resoundingly criticized for its lack of meaningful supporting data or analysis. Indeed, the agencies acknowledged at the time the proposal was released that they planned to "collect additional data to refine [their] estimates of the rule's effects" during the comment period, which will "inform finalization of the rule." 1 Finally, nearly three months after the proposal’s release, the FRB initiated the QIS on October 20, 2023.
The FRB should have completed its QIS before issuing the proposed rule and should have relied on the results from that QIS to inform its rulemaking process, including what changes to minimum capital requirements, if any, are appropriate for the stability of the U.S. banking system. The Chamber in May 2023 raised this point: “We urge the Board to provide an opportunity for the public to examine its Holistic Capital Review—including the data and methodology used to reach its findings—before proposing a rule to implement any new capital standards.”
To read the full letter click here.
