WASHINGTON – In response to the financial crisis from 2007 to 2009, Basel III Endgame was created to set the standards for capital reserves, liquidity, and leverage at financial institutions. As proposed, the increased capital requirements in Basel III Endgame will restrict billions of dollars in capital from financial institutions and hinder access to credit for consumers.

This month, U.S. Senator Kevin Cramer (R-ND) joined two letters citing concerns over the Basel III Endgame proposal’s impact on derivatives end users and requesting the withdrawal of the proposal.   

The first bicameral letter, led by U.S. Senator Jerry Moran (R-KS), called on Vice Chair of the Federal Reserve Michael Barr, Chairman of the FDIC Martin Gruenberg, and Acting Comptroller of the Currency Michael Hsu, to ensure the regulators take into account the impact the Basel III Endgame proposal would have on the derivatives market and the commodities producers who use futures and options, specifically in the agriculture industry.

They also note futures and derivatives markets play a stabilizing role for prices, helping to insulate consumers and businesses from market instability while involving minimal risk for end-users, including those in North Dakota. 

“The GSIB Surcharge Proposal and Basel III Endgame Proposal substantially exceed the Basel III framework and go significantly further than what is being implemented in other jurisdictions, such as Europe. This will inevitably put end-users seeking to hedge and manage risk on an uneven playing field with competitors in other jurisdictions,” the lawmakers wrote.

“The impact of these bank capital proposals will have a direct effect on the economy and our constituents. It is vital to approach any proposal regarding increased capital requirements, particularly increased capital requirements for hedging and risk management tools, with careful consideration and input from industry as well as a comprehensive cost-benefit analysis,” the lawmakers continued. “With rising economic and geopolitical risks, now is not the time to increase costs for farmers’ cooperatives, energy producers, and food processors seeking to responsibly hedge against instability.”

The letter is endorsed by the Farm Bureau Foundation, National Grain and Feed Association, National Milk Producers Federation, Louis Dreyfus, Commodity Markets Council, American Cotton Shippers Association, Futures Industry Association, and International Swap Dealers Association. 

The second letter, led by U.S. Senator Tim Scott (R-SC), requests the withdrawal of the Basel III Proposal. In November, Senator Cramer joined his colleagues in a letter requesting the withdrawal of the proposal, stating it would “create severe, adverse impacts on the entire U.S. economy, from every day American consumers to the small businesses that are the backbone of our economy.” 

“We write regarding our continued concerns with the Basel III Endgame proposal (“the proposal”). As we noted in our November 12, 2023, letter to each of you, your agencies have still yet to justify the need for this proposal with any sufficient economic analysis or proof that the banking system is currently under capitalized. [1] Since we last wrote to you, our concerns have not been mitigated, and testimony from the November 14 and December 6, 2023, Senate Banking Committee hearings has only deepened our resolve that this proposal is flawed and must be withdrawn,” the senators wrote.

“With today’s closure of the public comment period, we urge you to consider the negative impacts we have come to learn about the proposal and reconsider your agency’s approach. Accordingly, we once again urge you to withdraw the Basel III Endgame proposal as written and implore the Federal Reserve, the FDIC, and the OCC to operate in a more transparent and justified manner,” the senators concluded.

Following the introduction of the Basel III Endgame, Senator Cramer has been vocal in his efforts to pressure regulators for the misguided proposal.  In December 2023, he joined two letters expressing concern over the impact the proposed capital requirements would have on mortgage loans and outlining apprehensions with the operational risk portion of the rule.

Additionally, Senator Cramer joined Fox Business’ "Mornings with Maria" in December where he discussed the restrictive Basel III Endgame proposal.