Tuesday, February 28, 2017

Is the US Poised to Break from Basel III?


Author: David Schwartz J.D. CPA

In a letter dated January 31, 2017, Vice Chairman of the House Financial Services Committee Rep. Patrick McHenry (R-NC) called on Federal Reserve Chair Janet Yellen to cease negotiating "binding" international financial regulatory standards in such forums as the Financial Stability Board, the Basel Committee, and the International Association of Insurance Supervisors "until President Trump has had an opportunity to nominate and appoint officials that prioritize America's best interests.” 

 

Rep. McHenry cited the “secretive structures of these international forums” and their “opaque decision-making process” among his reasons for his request to Yellen and the Fed. 

 

This request to pull the US back from international banking standards comes at the same time as the European Union is finalizing the adoption of Basel III capital and loss-absorbtion guidelines. The European Commission, the EU’s executive arm, published proposals for the completion of banking regulation reform on November 23, 2016. Now the European Parliament and the Council of the EU have begun to deliberate on the proposals. And while the ultimate details of the the banking reform package referred to as “CRR II” are not yet known, the EU plans to have final regulations ready for implementation by 2019 or soon thereafter. In the US, however, the Trump administration and Congress seem eager not only to put the brakes on finalizing implementation of Dodd-Frank reforms and roll some back but also to divorce US regulators from standards set by international bodies like the Basel Committee. 

 

The text of Rep. McHenry's letter is available at: https://c.ymcdn.com/sites/iib.site-ym.com/resource/resmgr/weekly_bulletin/1-31-17McHenryLettertoYellen.pdf

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