Heading: Completing the banking puzzle

The US banking industry is in turmoil as regulators propose stricter capital requirements in a bid to bolster the financial system. The reform, dubbed the ‘Basel III endgame,’ will force banks with over $100bn in assets to set aside billions more by early 2028. The aim is to reduce systemic risk and enhance the sector’s resilience, but banks are pushing back, fearing the rules will limit lending capabilities and harm the economy.

The proposed changes have sparked a fierce debate, with banks arguing that the increased capital requirements will lead to higher costs without clear benefits. Critics, however, believe the rules are necessary to prevent another financial crisis and avoid taxpayer-funded bailouts. Regulators estimate a modest 16 percent increase in capital requirements for the largest banks, but industry groups claim the impact could be much higher.

The reform has also raised concerns about international competitiveness, as US banks will face stricter rules than their foreign counterparts. This could lead to reduced competition, mergers, and higher costs for customers. The Federal Reserve has indicated a willingness to compromise on the rules, but the final plan is still pending.

The political implications are significant, with the banking industry lobbying lawmakers and regulators to soften the proposals. Republican lawmakers have openly opposed the reforms, while a future Trump administration is expected to apply pressure for changes. The overhaul has also reignited criticism of Basel rules, with calls for stricter regulations worldwide.

As the debate rages on, the future of banking regulation in the US hangs in the balance. The outcome will not only impact the financial sector but also the broader economy and international competitiveness. Stay tuned for updates as the story unfolds.