Capital & Other Bank Regulations

Structured Finance Association (SFA) submitted a comment letter to the Federal Reserve, FDIC, and Office of the Comptroller of the Currency in response to their proposed capital amendments to Basel III for institutions with total consolidated assets over $100 billion.

SFA’s letter focuses on the dramatic changes proposed to the securitization framework as well as the implications of these changes to the cost and availability of credit to U.S. households and businesses. The letter highlights how the proposed increases to required risk-based capital are arbitrary and excessive since existing standards already incorporate post-crisis reforms.

The letter also demonstrates how the proposed framework is poorly calibrated, less risk-sensitive, and results in a variety of anomalous results. SFA, on behalf of its members, has requested that policymakers adopt the changes outlined in the letter and re-propose the rule for public comment.

“The BASEL ‘Endgame’ proposal is rife with arbitrary increases supported by little to no empirical data, said Michael Bright, CEO of the Structured Finance Association. “For our industry, chief among these is a doubling of a scaling factor that is clearly meant to be extra punitive to securitization for reasons that have nothing to do with today’s market reality. We strongly encourage the regulators to go back to the drawing board and take seriously the impact these numbers will have on capital formation and our economy.”

SFA would like to thank Mayer Brown and the SFA members who participated in the Basel III Task Force chaired by leaders at Bank of America, Capital One, S&P Global, MetLife, and Wells Fargo.