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Since the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and OCC released the Basel III endgame Notice of Proposed Rulemaking (NPR) in July 2023, industry participants have been assessing its implications for their capital requirements and how they engage their corporate and retail customers.
While there will be “broad and material” changes before the rule is final, 1 the NPR broadly reforms how banks calculate their capital requirements for credit, market, and operational risk exposure – making it the most potentially consequential change to U.S. banking regulation since the 2010 passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
This Our Take Special Edition, which follows a series of prior publications, analyzes the transmission of higher capital requirements in the form of risk-weighted assets (RWA) through the broader economy and assesses how these costs could impact U.S. banks’ products and services.