Monetary Matters with Jack Farley Mothballing the Basel III Endgame | The Future of US Bank Regulation with Jason Cave
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Jan 5, 2025 Jason Cave, a senior consultant at Potomac Global Partners with over 30 years of banking regulation experience, shares insights on the evolving landscape of U.S. bank regulations. He discusses the potential reopening of bank mergers and acquisitions, the pause on Basel III, and the optimistic outlook for banks under new leadership. Cave also addresses the future of Fannie Mae and Freddie Mac, emphasizing the ongoing challenges and the push for regulatory reforms that could benefit smaller banks and enhance overall stability in the financial sector.
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Unintended Consequences of Regulation
- Post-financial crisis regulations improved bank capital, but may have unintentionally hurt smaller banks.
- Mortgage servicing regulations and litigation made it unsustainable for large banks, leading to the rise of non-banks.
Basel III and SVB Response
- The final piece of Basel III was meant to level the playing field between US and European banks, not to further burden small US banks.
- The response to SVB was overly broad; a simpler supervisory approach focusing on interest rate risk would have sufficed.
Risk Weight Floors and Interest Rate Risk
- The supplementary leverage ratio is mostly settled; the risk weight floor is the key remaining issue in Basel III.
- The US has resisted Basel-style capital requirements for interest rate risk, preferring a supervisory approach.