Wall St pushes US regulators to further ease Basel capital requirements

Friday, June 19, 2026

Wall Street trade groups have urged US regulators to revise the upcoming Basel Endgame capital rules, warning that the proposed changes could significantly raise banks’ capital charges and restrict liquidity in the $29 trillion US Treasury market. The conflict centers on new mandatory clearing requirements, with banks arguing that without adjustments, increased capital costs may reduce market-making activity and harm Treasury market functioning.

Wall Street groups have urged US regulators to reconsider their planned implementation of the "Basel Endgame" global bank capital requirements, warning the rules could disrupt liquidity in the $29 trillion Treasury market. These cautions come as regulators, including the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), move to finalize rules aimed at revising how banks assess market risk—an initiative prompted by reforms following the 2008 financial crisis.

Industry trade organizations, including the International Swaps and Derivatives Association (ISDA), the Securities Industry and Financial Markets Association (SIFMA), and the Institute of International Finance (IIF), submitted a joint letter to the regulatory agencies. The letter, seen by reporters, contends that the current Basel proposals could increase banks’ capital requirements related to trading activities by between 30 and 89 percent, potentially constraining their ability to provide liquidity in Treasury securities and related repurchase agreement markets.

A central issue highlighted is the upcoming regulatory mandate to transfer US Treasury and repo trading to central clearinghouses starting next year. While mandatory clearing is expected to reduce the amount of collateral—or margin—required to back these trades, banks contend the Basel rules would counterintuitively raise capital charges for counterparty credit risk as a result. This divergence, they argue, could discourage market-making activity and impair liquidity in critical government debt markets.

Scott O’Malia, chief executive of ISDA, emphasized that without adjustments to the Basel framework, liquidity providers in the US Treasury market may face heightened capital costs with the transition to mandatory clearing. The trade groups describe several elements of the proposals as misaligned with the actual economic risks involved, calling for revised calibrations to better reflect market realities.

US regulators have previously scaled back some aspects of the Basel Endgame rules after pushback from the banking sector, resulting in anticipated overall capital requirements for American banks that are expected to decrease rather than increase. This regulatory easing marks a significant concession since the post-crisis reforms were introduced. Goldman Sachs CEO David Solomon recently expressed approval of the Federal Reserve’s approach to the Basel revisions.

Officials at the Federal Reserve reportedly remain skeptical of the industry’s claims regarding potential market disruption and have declined to comment publicly on the recent letter. The debate underscores ongoing tensions between maintaining financial stability through robust capital standards and ensuring sufficient liquidity in key markets such as US Treasuries.