Joint Trades Comment on Regulatory Capital and Standardized Approach for Risk-Weighted Assets

Ladies and Gentlemen:

The Bank Policy Institute, the American Bankers Association, 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 calculation of regulatory capital and the standardized approach for all firms other than Category I and II firms and firms that elect to apply the expanded risk-based approach.^[1]

We support the agencies' tailored approach to capital requirements embodied in the proposal and the concurrent proposal to implement the 2017 Basel III standards,^[2] which would apply to Category I and II firms (and, with respect to market risk and CVA risk requirements, certain other firms with significant trading activity) with the ability for other firms to opt into the expanded risk-based approach under that other proposal.^[3] As the calibration of the revised risk weights in the standardized approach proposal is based in part on analysis of the risk weights that would apply under the Basel III proposal,^[4] we encourage the agencies to update the calibration in the revised standardized approach based on the final version of the expanded risk-based approach.

We also support the agencies' goals of improving the calibration and risk sensitivity of the capital framework with respect to firms' core lending activities.^[5] This letter contains recommendations aimed at further improving the calibration and risk sensitivity of the proposed revised standardized 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 have 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 strongly 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 revised standardized approach.^[6]

The first section of this letter provides recommendations regarding the proposed changes to the requirements for credit risk. The second section provides comments on the proposed changes with respect to credit risk mitigants. The third section provides comments related to other aspects of the proposal. In addition, although this letter does not discuss the securitization framework, we support the recommendations with respect to the proposed changes to the securitization definition provided by the Structured Finance Association ("SFA") in their letter on the proposal.

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[1] OCC, Federal Reserve, and FDIC, Regulatory Capital Rules: Regulatory Capital and Standardized Approach for Risk-Weighted Assets, 91 Fed. Reg. 15,332 (Mar. 27, 2026) (hereinafter, "Standardized Approach NPR"). The proposed elimination of the threshold deduction for mortgage servicing assets would apply to firms that have elected to use the community bank leverage ratio framework, but the other aspects of the proposal would not apply to those firms.

[2] 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").

[3] Id. at 14,956.

[4] See Standardized Approach NPR at 15,341.

[5] Id. at 15,332 ("The proposal would revise the risk-based capital treatment of certain exposure categories under the standardized approach, focusing on improving the calibration and risk sensitivity of risk weights that are particularly material to covered banking organizations' lending activities.").

[6] We also reiterate our recommendations set forth in BPI and ABA's June 2026 letter submitted on tailoring, which details the importance of indexing based on GDP growth, rather than inflation, as captured by the CPI-W. BPI and ABA, Regulatory Tailoring Thresholds and Framework (June 3, 2026). CPI-W only captures the prices of consumer goods and services, and therefore excludes key parts of U.S. economic growth, including the price of investment goods and technology (which banks directly finance), which are captured in nominal GDP growth. Federal Reserve, Joint Press Release, Statement on Bank Capital Proposals by Governor Christopher J. Waller (March 19, 2026), available at https://www.federalreserve.gov/newsevents/pressreleases/waller-statement-20260319.htm. Adjusting the thresholds based on nominal GDP would more accurately classify firms based on their systemic importance, which would result in a better match between firms' capital requirements and relative importance in the U.S. economy.