The past three years of economic volatility have exacted a profound toll on many Americans, testing the resilience of households and businesses alike. During this period, the largest banks, fundamentally strengthened by a series of changes, have served as a source of support by extending enormous amounts of credit, helping customers navigate uncertainty, and stabilizing the broader banking sector at a critical moment. Now, as the CEOs of these banks gather on Capitol Hill, Congress must ask itself if proposed regulations on capital jeopardize the essential work of these institutions.
The capital regulation plan known as Basel III Endgame will increase capital requirements by 20% or more for the eight largest U.S. banks. This is an excessive move, considering the tripling of high-quality capital for these banks over the past 15 years. Higher capital requirements, as noted by Federal Reserve Chair Jerome Powell, raise the cost of–and reduce access to–credit.
The plan will certainly compound the burden of higher post-pandemic interest rates, particularly for those with lower incomes. Americans will have a harder time getting a loan, securing a mortgage, or saving for their retirement or a child’s college education.
The impact isn’t limited to individual consumers. Small businesses relying on credit and farmers needing funds for operations and equipment will face difficulty securing much-needed capital.
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