HFSC Hearing on Capital Proposals Economic Impact

Summary

SIFMA provided comments to the House Financial Services Committee, commending them for holding a hearing to evaluate the impact of capital proposals on American investors and communities. The Committee has a longstanding record of closely examining bank capital issues and their broader implications on the U.S. economy.

Excerpt

On March 19, 2026, the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation published three proposals (“2026 Proposals”) that intend to modernize the regulatory capital framework and maintain the strength of the banking system. The 2026 Proposals materially improves the calibration of the capital requirements for large banks’ capital market related activities relative to the 2023 Proposals, and addresses to various degrees many issues that SIFMA has consistently advocated for. However, there are still five priorities regarding capital requirements for banks’ capital market related activities that we believe warrant continued attention from policymakers.2

These priorities include:

1. The capital framework in its entirety should be calibrated to align with the level of risk but avoid excessive conservatism.
2. The FRTB framework should accurately account for the risk-reducing effects of diversification across different asset classes.
3. Both risk-based and leverage capital frameworks should properly reflect the risk reduction from cross-product netting and cross-margining.
4. Derivatives involving commercial end users should be excluded from CVA capital requirements.
5. Capital requirements should be tailored based on a banking organization’s systemic risk profile.

These adjustments are essential to maintaining vibrant, competitive, and resilient capital markets, supporting economic growth and financial stability.

Appropriate Calibration of the Bank Capital Framework

SIFMA strongly supports a bank capital framework that is calibrated to actual risk exposures, ensuring that the resulting capital requirements are neither excessively conservative nor misaligned with underlying risks arising from large banks’ capital markets related activities. The 2026 Proposals, while materially improving risk-sensitivity of capital requirements relative to the 2023 proposals and intended to strengthen financial stability,3 risk imposing higher capital charges that may not accurately reflect the true risk of capital markets related activities.