SIFMA: Basel III Endgame’s potential impacts on commercial end-users

The potential significant increase in capital requirements for large banks’ capital market activities due to the Basel III Endgame could materially reduce the depth of banks’ products and services offerings to end-users, which in turn leads to reduced competition and increased cost of raising capital and hedging risk for a wide variety of commercial end-users, writes the Securities Industry and Financial Markets Association (SIFMA).

As a result, some end-users could encounter difficulties in their access to liquidity and affordable funding to fuel growth and create jobs and provide critical civil services (in the case of municipalities). The treatment of unrated corporate exposures under the revised credit risk framework and the services component under the new operational risk framework are among the factors leading to the significant capital increase. The straightforward changes SIFMA proposes would help mitigate those impacts and should be adopted by the banking agencies as they implement the Basel III Endgame reforms.

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