The Basel Committee’s minimum capital requirements have faced criticism for years, but the effort to implement global banking-supervision rules post-2008 now seems on the brink of collapse
In 2023, the US Federal Reserve proposed stricter capital requirements, potentially raising them by 19% on average for American banks. This sparked a fierce backlash from the financial industry, including high-profile figures like JPMorgan’s Jamie Dimon. As a result, the Fed revised its proposals, halving the original impact, yet even these diluted measures face uncertainty. The Federal Deposit Insurance Corporation has signaled reluctance, and political opposition is mounting, with some advocating abandoning the Basel regime entirely.
Europe presents similar challenges. French President Emmanuel Macron has urged the European Commission to reconsider its plans for implementing Basel 3.1, arguing that the EU shouldn’t be the only region adhering to these rules, especially as European banks lose market share to their US counterparts. The UK, historically a strong proponent of Basel rules, faces internal pressure to prioritise growth and competitiveness, particularly for small-business lending.
Disagreements over facts exacerbate the situation. US banks argue the Fed’s proposals would disadvantage them, while European leaders claim the opposite. A report by Oliver Wyman found EU banks to be better capitalised, but conflicting internal research from the European Central Bank suggests otherwise. The ECB’s reluctance to publish its findings highlights the political sensitivity of these issues.
What began as a response to the global financial crisis has stalled. While Basel III’s core provisions were introduced in 2010, the latest revisions are proving more divisive. Political will for reform has diminished, with little mention of Basel at the recent G20 summit in Brazil. Countries that have already implemented the new rules, like Australia and Singapore, may soon protest the uneven application, potentially derailing the process entirely.
As new leadership takes the reins in the US and EU, there’s a pressing need for collaboration. The stakes are high, and further delays risk leaving the entire framework in limbo.
It’s a moment of waiting — not unlike Samuel Beckett’s Waiting for Godot — and the financial world can only hope Godot arrives soon.