The Fed’s Revised “Basel Rules” Show Why Listening to Stakeholders Matters

By SBE Council at 19 March, 2026, 3:34 pm

By Karen Kerrigan -

The Federal Reserve's release of the revised Basel III "Endgame" proposal on March 19, marks a significant shift in approach to one of the most consequential financial regulatory matters of the decade. Vice Chair for Supervision Michelle Bowman deserves much of the credit for the course correction, as she emphasized a careful, transparent review of stakeholder feedback before finalizing sweeping regulatory changes.

This approach is especially important for America's entrepreneurs and small business owners, who rely on sound regulation to ensure healthy capital markets and access to credit to grow their firms.

Bowman emphasizes that capital rules should protect financial stability while allowing banks to provide credit. She warns that overly strict requirements risk limiting lending to entrepreneurs who count on financing to grow.

The revised proposal embodies this philosophy by slightly lowering capital requirements, and calibrating them to align with the real-world risks faced by the banking sector. Such a framework signals that regulators can achieve their goal of stability without sacrificing economic growth and vibrancy, with the aid of stakeholder input.

The inclusive process stands in sharp contrast to the original Basel Endgame proposal advanced in 2023, under former supervision chief Michael Barr.

Barr's proposal would have raised capital requirements for banks by 16 to 20 percent on average. It would also have expanded stricter regulations to additional institutions. At that time, a litany of organizations - including business groups, consumer watchdogs, economists, and policy experts - warned that such sweeping changes would tighten credit conditions and increase borrowing costs across the economy.

The Small Business & Entrepreneurship Council raised these concerns directly in a formal comment lettersubmitted in 2024. Small businesses generate nearly half of U.S. GDP and rely heavily on bank lending for working capital, equipment purchases, and expansion. When regulatory changes significantly increase the cost and availability of lending, those consequences inevitably pass through to borrowers.

Polling data from SBE Council underscores how central capital access remains to the small-business economy. Our organization's most recent February 2026 "Small Business Check Up Survey" found that 43 percent of small business owners reported that limited access to capital is limiting their ability to grow and expand their firms. At the same time, the survey shows strong momentum, with 81 percent expressing confidence that 2026 will be a positive year for business performance and opportunity. The combination of optimism and constraints highlights a simple reality: Entrepreneurs are eager to invest, hire, and expand, but their capacity to do so depends on access to affordable financing.

Unlike large corporations with access to diversified funding sources, many small and local businesses depend on traditional bank lending. Tighter capital rules limit the capacity of bank lending, affecting small businesses first.

The revised Basel proposal conveys that regulators value the engagement of stakeholders, which can produce smarter, growth-supporting regulation.

Bowman's approach signals that effective financial safeguards and economic growth can coexist. A properly designed regulatory framework supports stability while enabling banks to finance business growth.

SBE Council looks forward to commenting on the new proposal and engaging with regulators. We have long believed that thoughtful, transparent policymaking incorporating stakeholder input produces better regulatory outcomes. In this case, such engagement is obviously vital to the success of America's entrepreneurs and small businesses.

Karen Kerrigan is the President of the Small Business and Entrepreneurship Council