Central ND News

WASHINGTON – The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) have announced proposed regulations to implement the final components of the Basel III agreement aimed at raising bank capital requirements. The proposal sets standards for capital reserves, liquidity, and leverage at financial institutions. Large banks are mandated to transition to this new framework by July 1, 2025, with full compliance expected by July 1, 2028.

The new proposal is anticipated to restrict billions of dollars in capital from financial institutions and hinder consumer access to credit. Comments submitted to regulators indicate that 97% expressed concerns about its implementation.

Earlier this year, Basin Electric Power Cooperative, a major electric cooperative based in Bismarck, North Dakota, testified before the Commodity Futures Trading Commission (CFTC), expressing apprehensions about potential pitfalls in implementing Basel III Endgame.

During a Senate Committee on Banking, Housing, and Urban Affairs hearing with Federal Reserve Chairman Jerome Powell, U.S. Senator Kevin Cramer (R-ND) highlighted Basin Electric’s comments. He emphasized how the proposal could impact electricity generators' ability to provide reliable and affordable service.

Basin Electric explained that as part of an electric cooperative’s risk management program, it may purchase natural gas in advance on a long-term basis at a fixed price for use in its power plants. This strategy is crucial for protecting electric cooperatives' financial positions since electricity market prices fluctuate based on spot prices of natural gas. If cooperatives cannot secure appropriate financial instruments to mitigate market and energy price risks, costs could become financially detrimental for Americans and U.S. businesses.

“This is an electricity supply that we're talking about: it’s critical it remains reliable; it's critical that it remains affordable,” said Cramer. “Part of an electric cooperative’s risk management...is how it buys the fuel that generates the electricity...They may buy natural gas in advance at a fixed price...but they can hedge by buying it at a fixed price for power plants...It protects itself and its consumers from high prices.”

After providing this example, Powell acknowledged awareness of the issue and appreciated Cramer bringing it up.

Cramer further emphasized the importance of maintaining Federal Reserve independence amid moves within his party suggesting otherwise. “But those moves are very narrow and I don't think very realistic,” said Cramer. “Perception does matter...any move to lower interest rates or move interest rates either direction before November 5 could certainly be a bad perception...As long as you remain independent, I'll be on your side.”

Since introducing Basel III Endgame regulations, Cramer has been vocal about what he considers a misguided proposal. In January, he joined two letters citing concerns over its impact on consumers and requesting withdrawal of the proposal. Additionally, he cosigned a letter highlighting impacts on proposed capital requirements for mortgage loans.