On Sep. 25, SIFMA published testimony on bank capital requirements.
SIFMA president/CEO discussed bank capital requirements in testimony before House.
The testimony was delivered before the U.S. House of Representatives Financial Services Committee Financial Institutions and Monetary Policy Subcommittee.
Testimony Summary
Noted bank capital requirements have material impacts across the entire economy.
Crucial that policymakers, including Congress, conduct sufficient analysis to ensure bank capital requirements balance both financial stability and macroeconomic growth.
Capital levels are already robust and any further proposed increases should be sufficiently scrutinized to determine both the tangible benefits and costs to economy.
Noted SIFMA's deep concern with the Basel III Endgame proposal as it was issued and highlighted key recommendations while policymakers prepare to issue a re-proposal.
Also addressed tress testing reforms, GSIB surcharge, long-term debt proposals and FDIC’s recent proposal to revise the regulations surrounding brokered deposits.
Basel III Endgame Recommendations
Any re-proposal should account for overlaps with other prudential requirements.
Account for interactions between Global Market Shock (GMS) and FRTB frameworks.
Give greater credit for diversification under modeled and standardized FRTB approach.
Adjustments to capital requirements for modellable risk factors and non-modellable risk factors needed in the FRTB portion of the proposal, in addition to P&L loss test.
Client-facing client-cleared derivatives transactions excluded from scope of the CVA.
Over-the-counter derivatives transactions with commercial end-users need to receive more favorable treatment in the final U.S. rule to align treatment with EU and UK.
Revise risk incentives that discourage large banks from securitization activities.
Remove securities financing transactions (SFT) haircut framework from the proposal.
Analyze investment grade counterparties and collateral and operational risk.
Provide more clarity around timeline, with a recommendation of at least 18 months from completion of the final rule, for firms to begin implementing the new framework.
