Central ND News

The Senate Banking, Housing, and Urban Affairs Committee recently held a hearing on the Federal Reserve's semiannual monetary report to Congress. Federal Reserve Chairman Jerome Powell provided testimony at this session.

In July 2023, the Federal Reserve, along with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), proposed regulations to implement the final components of Basel III. This proposal aims to set standards for capital reserves, liquidity, and leverage at financial institutions. Large banks are expected to transition to this new framework by July 1, with full compliance required by July 1, 2028.

U.S. Senator Kevin Cramer questioned Powell about advancing a new Basel III proposal, particularly concerning regional and community banks. Cramer asked how updated regulations might impact regional banks' ability to compete with larger Wall Street banks and emphasized the importance of maintaining a competitive banking system.

Powell responded: “My own view has been that our banks are well-capitalized and Basel III was not supposed to be an exercise in raising capital on U.S. banks.” He further noted that regional banks do not face global systemically important bank surcharges or burdens like large banks do in resolution planning. Powell stressed the need for these smaller banks to remain healthy and profitable to ensure competition with larger entities.

Cramer continued by asking if there were specific measures that could maintain a competitive and diverse banking system rather than lead to consolidation among community, regional, or Wall Street banks.

Powell replied: “You think twice before you impose the kinds of things that we impose on the largest banks and the next-to-largest banks,” emphasizing caution against applying identical standards across all bank sizes as it could increase fixed costs for smaller institutions.

Senator Cramer has actively expressed concerns about what he perceives as misguided aspects of Basel III Endgame proposals. In January 2024, he joined two letters citing potential negative impacts on consumers and called for withdrawing certain proposals. Additionally, he co-signed a letter addressing proposed capital requirements' effects on mortgage loans and questioned Powell in July 2024 regarding its implications for electricity prices.