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The Basel Committee for Banking Supervision (BCBS) finalization of Basel III, known as Basel III Endgame, introduces extensive changes, especially in the calculation of risk-weighted assets (RWA). These alterations will significantly impact business models, compelling banks to reconsider their capital allocation strategies.
On July 27th, 2023 the US Federal Reserve and FDIC published their Notice for Proposed rulemaking (“NPR”) for Basel III Endgame. The comment period, originally November 30, 2024, was extended to January 16, 2024 with final rule publication expected Q2/Q3 2024. Currently, there are 4 dissents, 2 at FDIC, Vice Chairman Hill & Director McKernan, and 2 at Fed, Governors Bowman and Waller, as a result of concerns about the potential impact on economic growth and market liquidity. Potential impact includes globally systemically important banks experiencing an increase of 21% in capital requirements vs. 10% increase at regional banks. Implementation of Basel III endgame would take effect July 1, 2025 with a three year phase-in of the capital ratio impact through June 30, 2028.
Webcast: Implications of Basel III endgame notice for proposed rulemaking
US bank regulators deliberate Basel III endgame implementation: Assessing capital sufficiency and determining required amount
US bank regulators must assess the implementation of Basel III Endgame by addressing two key questions: first, whether current capital increases and regulatory reforms are enough to prevent taxpayer-funded bailouts in economic downturns or market turmoil; and second, if additional capital is needed, determining the required amount. Our review of literature from regulators, standard-setting bodies, and academics indicates that the suggested optimal capital level, while varying across papers, closely aligns with the levels expected under Basel III Endgame requirements.
Our Take: The changing regulatory landscape
Discover the latest updates on Basel III reforms and other financial services risk & reg topics through PwC’s Our Take. We offer our in-depth analysis on key developments shaping the industry as they happen in real-time.
Our Take Special Edition: Basel III endgame
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