Joint Trades Comment on Basel Proposal

Ladies and Gentlemen:

The Bank Policy Institute, the American Bankers Association, the Financial Services Forum, the U.S. Chamber of Commerce, and the Consumer Bankers Association submit this letter in response to the joint notice of proposed rulemaking issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency that would amend the capital requirements mandatorily applicable to Category I and II firms and revise the market risk capital framework applicable to firms with significant trading activity.^[1]

We appreciate the agencies' intent to calibrate the proposal considering the interplay with other aspects of the capital framework. As described in the proposal, the agencies considered the calibration of the entire capital framework, particularly the relationship between the proposed capital rules and stress testing framework, in assessing the impact of the proposal.^[2] However, the agencies' calibration approach does not fully eliminate the overlap between certain aspects of the capital framework, which results in over-capitalization for operational, market, and credit valuation adjustment ("CVA") risks. The agencies should make further revisions to properly calibrate all aspects of the capital framework. This letter contains some recommendations for how to do so, and our February 20, 2026 letter in response to the Federal Reserve's October 2025 stress testing transparency and accountability proposal (the "Stress Test Letter") does as well.^[3]

We also support the agencies' goals of improving the risk sensitivity and consistency of the capital framework and simplifying its design.^[4] This letter contains recommendations aimed at further improving the calibration and risk sensitivity of the proposed expanded risk-based approach, as well as recommendations for how the proposal could be revised to reduce unnecessary operational burden on firms. In general, we appreciate the detailed explanations and impact analysis provided in the proposal, which has enabled us to more effectively evaluate the proposal and provide the recommendations in this letter. However, this letter also discusses issues arising from the proposed revisions to the definitions of "commitment," "unconditionally cancelable," "traditional securitization," and "synthetic securitization," which we urge the agencies not to finalize in light of the ambiguity these proposed changes would create and the unassessed-and unassessable-effect they would have on firms' capital requirements. Apart from these changes, we encourage the agencies to finalize the proposal expeditiously, so firms and the broader economy can benefit from the improved risk sensitivity in the expanded risk-based approach.

The first section of this letter provides recommendations regarding the interaction of the proposal with other aspects of the capital framework. The second and third sections provide comments on the proposed expanded risk-based approach with respect to credit risk and operational risk, respectively. The fourth section provides comments on the proposed changes to the credit risk mitigation framework. The fifth section provides comments related to other aspects of the proposal. The sixth section of this letter provides several technical comments and responses to certain questions asked in the proposal. The final section of this letter reports the estimated impact of the agencies' capital proposals on aggregate common equity tier 1 ("CET1") capital requirements for U.S. GSIBs based on a quantitative impact study conducted based on data provided by the eight Category I firms (the "Category I Member QIS"). The results show that the aggregate reduction in required capital from the proposals is likely less than estimated by the agencies, and that capital required under the U.S. capital framework will remain meaningfully higher than that provided by the Basel framework. Throughout this letter, we provide recommendations that would reduce this over-calibration and, where available, have included data based on the Category I Member QIS demonstrating the extent to which our recommendations would reduce the over-calibration.

To read the full comment letter, please click here, or click on the download button below.

[1] OCC, Federal Reserve, and FDIC, Regulatory Capital Rule: Category I and II Banking Organizations, Banking Organizations With Significant Trading Activity, and Optional Adoption for Other Banking Organizations, 91 Fed. Reg. 14,952 (Mar. 27, 2026) (hereinafter, "Basel III NPR").

[2] Id. at 14,960 ("[T]his proposal is projected to increase the minimum requirements for operational risk and market risk, while the stress test proposal's analysis of the proposed model changes estimated a decrease in related requirements for these risks, as they inform the stress capital buffer requirement. The Board expects both sets of revisions to improve risk sensitivity and coherence of the capital framework, while the revisions in this proposal would contribute to international consistency. The capital impact of these revisions would largely offset each other, and the Board considers that the combined calibration of these risks would be appropriate…….. ").

[3] See ABA, BPI, FSF, Securities Industry and Financial Markets Association ("SIFMA"), International Swaps and Derivatives Association ("ISDA"), and U.S. Chamber of Commerce, Letter re Notice of Proposed Rulemaking regarding Enhanced Transparency and Public Accountability of the Supervisory Stress Test Models and Scenarios; Modifications to the Capital Planning and Stress Capital Buffer Requirement Rule, Enhanced Prudential Standards Rule, and Regulation LL (Docket No. R-1873; RIN 7100-AH05) (Feb. 20, 2026), available at https://bpi.com/wp-content/uploads/2026/02/Stress-Test-NPR-2.20.26-Comment-Letter.pdf.

[4] Basel III NPR at 14,955.