On September 9, 2022, the US federal banking regulators announced their intent to revise US regulatory capital requirements to align them with the regulatory capital standards that were finalized by the Basel Committee on Banking Supervision (“BCBS”) in December 2017.¹ This announcement is consistent with informal messaging from agency principals and staff but does not address industry concerns regarding the timing and content of the revisions to the US requirements. It also aligns with a recent speech by Vice Chair Michael Barr in which he stated that he is committed to implementing enhanced regulatory capital requirements that align with the 2017 BCBS standards.²

Background

Since the 1980s, the BCBS has developed and refined regulatory capital standards for internationally active banking organizations. However, the BCBS standards do not have the force of law in the United States. Rather, the US banking regulators determine whether and how to apply BCBS standards to US banking organizations. These determinations generally are made through the notice-and-comment process and can result in US approaches that differ from the BCBS approach.

In June 2011, following the financial crisis, the BCBS released significant revisions to the regulatory capital standards known as “Basel III.” These revisions were adopted by the US banking regulators in 2013.³

Basel Endgame

In June 2017, the BCBS finalized revisions to the Basel III regulatory capital standards in a consultation process that the industry refers to as “Basel IV” or the “Basel Endgame.”⁴ These revisions were extensive and address:

• Changes to risk-weights under the standardized approach
• Restrictions on the use of models under the advanced approaches
• Revisions to the credit valuation adjustment risk framework
• An overhaul of the operational risk framework, including a more explicit operational risk capital charge under the standardized approach
• Refinements to the leverage ratio framework
• Creation of...