Basel III Endgame, Standardized Approach, and GSIB Surcharge Proposals (SIFMA AMG)
Summary
SIFMA Asset Management Group (SIFMA AMG) 1 provided comments to the Office of the
Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (the Federal Reserve), and the Federal Deposit Insurance Corporation ( FDIC) to modify the regulatory capital requirements applicable to large banking organizations and banking organizations with signifi cant trading activity, which would implement the final components of the Basel III capital standards known as the Basel III endgame (the Basel III Proposal). 2
Excerpt
In addiAon, this letter includes SIFMA AMG’s comments on the amendment to the calculaAon of regulatory capital and the standard approach for all fi rms other than Category I and II fi rms and fi rms that elect to apply the expanded risk-based approach (“the Standardized Approach”), and the Federal Reserve’s proposal (“the GSIB Surcharge Proposal”, 3 and collectively with the Basel III Proposal and the Standardized Approach, “the Proposals”) to make certain adjustments to the calculation of the GSIB surcharge for the U.S. GSIBs.
I. Executive Summary
SIFMA AMG members appreciate the Agencies’ policy objectives to bolster the safety
and soundness of the U.S. banking system, and support measures that would ensure the
resiliency and stability of the U.S. fi nancial markets as they execute investment and hedging
strategies in support of client goals, including saving for college, buying a home, and planning for retirement. SIFMA AMG commends the Agencies for addressing the many of the design issues with the 2023 proposals that could have detrimental effects on pricing, transaction costs, the availability of services and market liquidity.4,5 However, our members are all concerned with certain aspects of the 2026 Proposals that may have potentially far-reaching, adverse eff ects on the U.S. fi nancial markets.
To that end, we offer our comments to highlight the downstream effects the Proposals would have on ordinary investors and end-user members’ clients. In particular, the Proposals could make it more diffi cult for asset managers to meet their clients’ investment targets or mitigate risks in their portfolios, as banking organizations abandon or curtail their off erings in certain products or services, reduce their provision of liquidity in markets that are no longer commercially viable, or become more selective as to their customers and counterparties.
- SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management fi rms whose combined assets under management exceed $62 trillion. The clients of SIFMA AMG member fi rms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, undertakings for collective investment in transferable securities (UCITS) and private funds such as hedge funds and private equity funds.