Warren, Reed, Van Hollen, Durbin, Blumenthal Call On Regulatory Agencies to Rescind Capital Proposals That Would Make Banking System More Fragile

Warren, Reed, Van Hollen, Durbin, Blumenthal Call On Regulatory Agencies to Rescind Capital Proposals That Would Make Banking System More Fragile

"American families are struggling under President Trump's failed economic agenda. The last thing they need is for an unstable banking system to further threaten their jobs, access to credit, and life savings."

Text of Letter (PDF)

Washington, D.C. - U.S. Senators Elizabeth Warren (D-MA), Ranking Member of the Committee on Banking, Housing, and Urban Affairs, Jack Reed (D-RI), Chris Van Hollen (D-MD), Dick Durbin (D-IL), and Richard Blumenthal (D-CT) sent a letter to Vice Chair for Supervision at the Federal Reserve Michelle W. Bowman, Comptroller of the Currency Jonathan Gould, and Chairman of the Federal Deposit Insurance Corporation (FDIC) Travis Hill urging the agencies to withdraw three capital proposals, including the Basel III Endgame proposal, that would increase the likelihood of big bank failures and subsequent taxpayer bailouts. The Senators advised that the Federal Reserve, the Comptroller of the Currency, and the FDIC should instead re-propose strong capital rules that promote lending and economic growth.

Today's "2026 Basel III proposal drastically waters down core components of the 2017 agreement and 2023 proposal and increases the likelihood of bank failures," wrote the Senators. "The 2026 proposal scraps the key pillar of the 2017 agreement and 2023 proposal: significant improvements to the big bank capital framework for the risky trading activities that proved dangerously over-leveraged in the 2008 financial crisis."

The Senators outlined that the Basel III Endgame proposal would also:

• "(R)educe capital requirements for loans to nonbank financial companies, like private credit funds," which would "needlessly increase the risk that distress among nonbank financial institutions destabilizes the banking system."
• "(Remove) improvements to the capital framework that were designed to better protect against losses from operational failures, such as fines from legal violations, cybersecurity attacks, system outages, or other operational events."

The Senators detailed how the 2026 Basel III proposal appears to violate the law: "Section 171 of the Dodd-Frank Act, otherwise known as the "Collins Amendment," prohibits regulators from establishing risk-based capital requirements for big banks that are lower than the generally applicable risk-based capital requirements that apply to all banks … In our view, the 2026 proposal violates this provision by exempting big banks from the generally applicable capital requirements and subjecting them to a more lenient risk-weighted capital framework, a fact plainly supported by the agencies' own quantitative analysis."

The Senators also expressed concern with two other proposals included in the package: "One proposal would amend a regulatory formula to reduce the additional capital surcharge that applies to the eight U.S. Global Systemically Important Banks (GSIB), further undermining the resilience of the largest and most complex banks in the country. The other proposal would apply lower risk-weights to an assortment of bank assets, reducing required capital by 6-8% for all banks not covered by the Basel III Endgame proposal."

"The agencies should rescind these three proposals and promote long-term economic growth by re-issuing rules that meaningfully strengthen capital requirements," concluded the Senators.

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