Policy News

BAFT Response to U.S. Agencies Proposed Basel III Endgame Framework

On January 16, 2024 BAFT made its’ submission to the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC)  in response to the agencies proposed Basel III Endgame Notice of Proposed Rule (NPR).

The association welcomed the opportunity to respond to the request for comment made by the Federal Reserve Board, the FDIC, and the OCC in respect of the Proposed Rule 88-FR-64-028, the “Basel Endgame”.

BAFT is an international financial services industry association whose membership includes U.S. banks which range in asset size from G-SIBs to Regional Banks with less than $200 billion in assets, as well as a broad range of other financial institutions throughout the global community, many of which also operate within the United States. As a worldwide forum for analysis, discussion, and advocacy in international financial services, BAFT member banks provide leadership to build consensus in preserving the safe and efficient conduct of the financial system worldwide.

BAFT closely monitors the impact that new regulatory initiatives could have on the provision of trade financing and payment services that support real economic commerce. To that end, our comments and recommendations are focused on the impact of the Final Basel III Reforms on trade finance.

BAFT supports the intent of the Basel III reforms to reduce variations in reported risk-weighted assets across banks. However, we are concerned that the proposed framework will likely have unintended consequences that negatively affect the availability of credit and liquidity supporting
international commerce conducted by US companies as a result of inappropriate calibrations.

Specifically, trade finance, which consists primarily of short-term, self-liquidating instruments, does not serve as a source of leverage and is vital to the settlement of international commerce involving hundreds of thousands of US companies.