TSL Express Daily News

The Secured Lender

TSL-NOV24-COVR 

SFNet's 80th Annual Convention Issue
 

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November 25, 2024

Source: SFNet

SFNet Advocates for Favorable Outcomes as Basel III Endgame Rulemaking Awaits New Administration

Federal regulators have announced a pause on major regulatory actions, including the Basel III Endgame proposal, until President-elect Trump takes office in 2025. During a House Financial Services Committee hearing on November 20, Federal Reserve Vice Chair Michael Barr confirmed that the central bank will not proceed with Basel III Endgame, the long-term debt proposal, or bank liquidity rules during the remainder of the current administration.

The Secured Finance Network (SFNet) has voiced significant concerns about the proposal’s handling of asset-based lending (ABL). Specifically, SFNet has publicly commented that the proposal fails to account for the risk mitigation provided by highly liquid nonfinancial collateral, such as receivables and inventory. SFNet warns that the proposed changes could raise capital requirements for ABL and potentially reduce credit availability for small and medium-sized businesses that depend on this financing.

In a September speech, Vice Chair Barr previewed changes that would reduce the proposed capital requirement increase from 19% to 9%. However, Committee Chairman Patrick McHenry noted that 76% of public comments on the original proposal were not fully addressed in these revisions, sparking concerns about transparency and responsiveness.

Rep. Andy Barr (R-KY), who recently led a bipartisan delegation to meet with the Basel Committee on Banking Supervision, emphasized that the Basel III Endgame should prioritize economic growth and align with the principle of capital neutrality. He cited feedback from Basel Committee officials, who suggested that the original proposal deviates from the capital neutrality envisioned in the Basel framework.

Vice Chair Barr defended the proposed changes, stating that they address the most critical comments and indicated that further revisions are likely before the final proposal. He reaffirmed the Federal Reserve’s commitment to adhering to the Administrative Procedure Act and working with new appointees at the Office of the Comptroller of the Currency (OCC) and FDIC in 2025.

The delay in implementing Basel III Endgame reflects a broader regulatory caution during the transition period. Both the FDIC and OCC have similarly confirmed they will not finalize any major rules in the next two months, signaling a pause across several key regulatory initiatives.