After nearly three years of controversy, the long-awaited U.S. implementation of Basel III endgame is getting a do-over. On March 19, 2026, the Federal Reserve Board (“FRB”), Office of the Comptroller of the Currency (“OCC”) and Federal Deposit Insurance Corporation (“FDIC”) (collectively, the “Agencies”) issued three proposals that, taken together, would comprehensively overhaul the existing U.S. bank capital framework (together, the “Proposals”) and, at long last, implement the Basel Committee on Banking Supervision’s 2017 revisions to the Basel III capital framework (the so-called Basel III “endgame”). As noted in the Agencies’ joint press release, the Proposals are intended to “streamline capital requirements and better align regulatory capital with risk while maintaining the safety and soundness of the banking system.” These Proposals represent a dramatic pivot from the Agencies’ controversial initial attempt in 2023 to implement Basel III endgame and to revise the GSIB capital surcharge (together, the “2023 Proposals”). The 2023 Proposals were fiercely criticized and opposed by banking industry members and groups on a number of bases. In connection with the release of the Proposals, the Agencies confirmed that they were formally rescinding the 2023 Proposals.
The Agencies’ three Proposals include the following:
- A re-proposal of the Basel III endgame reforms that would apply an expanded risk-based approach (the “ERBA”) to Category I and Category II banking organizations (the “Basel III Endgame Proposal”).
- A proposal to revise the existing standardized approach to risk-based capital that would apply to other banking organizations (the “Standardized Approach Proposal”).
- A re-proposal of the GSIB capital surcharge that applies to the eight U.S. GSIBs as well as proposed changes to the Systemic Risk Report (FR Y-15), issued solely by the FRB (the “GSIB Surcharge Proposal”).
The Agencies anticipate that the amount of overall capital in the banking system “would modestly decrease” if the Proposals are implemented, although they expect that levels would nonetheless remain “substantially higher” than they were prior to the financial crisis. The FRB voted 6–1 to advance all three Proposals, with Governor Michael Barr as the sole dissenting vote, signaling overall bipartisan support. The FDIC board (including OCC Comptroller Jonathan Gould) voted unanimously in favor of both the Basel III Endgame and Standardized Approach Proposals. Comments on the Proposals are due June 18, 2026.
In this blog, we outline initial key takeaways and overarching themes from the Proposals.
1. Capital Requirements Are Going Down, Not Up
Perhaps the most significant headline is the directional shift the Proposals represent in comparison to the 2023 Proposals, which had called for significantly increased capital requirements. In contrast, the Agencies noted that these new Proposals, in the aggregate, “would modestly reduce capital requirements for large banks and moderately reduce requirements for smaller banks.”
The FRB staff memo on the Proposals summarized the anticipated cumulative change in aggregate common equity tier 1 (“CET1”) capital requirements as follows:
| Category I and II firms | Category III and IV firms | Smaller banking organizations | |
| Basel III NRP | +1.4% | ||
| GSIB Surcharge NPR | -3.8% | ||
| Revised Standardized Approach | -6.1% | -7.8% | |
| AOCI Requirement | +3.1% | ||
| Proposed Stress Test Changes | -4.3% (global market shock & operational risk) +1.9% (other changes) | -2.2% | |
| Total | -4.8% | -5.2% | -7.8% |
2. The Proposals Are Part of a Broader Reform Package
The Proposals form part of a broader set of changes that seek to revise the regulatory capital framework. With respect to the largest banks, the Basel III Endgame and GSIB Surcharge Proposals would modify two key pillars of what Vice Chair Michelle Bowman has referred to as the “four pillars” of the regulatory capital framework that apply to the largest banks—namely, stress testing, the supplementary leverage ratio, the Basel III framework, and the GSIB surcharge. The Agencies addressed the other two pillars—stress testing and the supplementary leverage ratio—last year in a proposed rule on stress testing and a finalized rule to revise the enhanced supplementary leverage ratio. Crucially, the Agencies evaluated the Proposals’ impact on a cumulative basis alongside these other reforms, answering years of industry calls for a more holistic rather than piecemeal view of the capital framework. Further, the Standardized Approach Proposal forms part of a broader effort to adjust capital requirements for smaller and less complex banks, as the Agencies previously proposed amendments to the community bank leverage ratio.
3. Narrowed Scope: Only the Largest Banks Face Mandatory Application of the Basel III Framework
The requirements set forth in the Basel III Endgame Proposal would be mandated only for Category I and II firms under the FRB’s existing tailoring framework, which includes the eight U.S. GSIBs and one additional large institution. This is a major narrowing from the 2023 Proposals, which would have also applied to Category III and IV firms (i.e., banking organizations with $100 billion or more in assets). Under the re-proposal, all other banking organizations (i.e., non-Category I/II firms) would have the option (but not the obligation) to adopt the ERBA. Category III and IV firms are thus relieved of the burden of implementing this more complex capital framework, although the Agencies’ analysis suggests a small number could benefit from opting in.
4. Smaller Banks Get Meaningful Relief through the Revised Standardized Approach
The Standardized Approach Proposal would revise the standardized approach to risk-based capital for banking organizations not subject to the ERBA under the Basel III Endgame Proposal (and that have not elected to use the community bank leverage ratio framework). The Agencies explain the intention of the revisions was to focus on “improving the calibration and risk sensitivity of risk weights that are particularly material to covered banking organizations’ lending activities while maintaining the standardized approach’s simplicity.” The Agencies estimated that the Standardized Approach Proposal would decrease CET1 by approximately 8.6% for covered depository institutions and 6.8% for covered holding companies relative to the current standardized approach (assuming no AOCI impact).
5. For the Largest Firms, a Single Calculation, Rather than Two
For the largest banking organizations, the Basel III Endgame Proposal would replace the current dual-capital ratio calculation system—pursuant to which firms must calculate capital ratios under both the standardized approach and advanced approaches, then take the lower ratio—with the single ERBA. As Chairman Jerome Powell noted, this would “simplify how banks calculate their compliance with capital requirements—requiring only one, simple calculation, rather than two.” Vice Chair Bowman similarly emphasized that “experience shows this duplication creates burden without providing corresponding benefits.” This is a significant change from the 2023 Proposal, which would have retained the dual-capital ratio calculation approach.
6. Apparent Pull-Back from Gold-Plating
One of the most criticized aspects of the 2023 Proposals was the systematic over-calibration of risk weights above international Basel minimums. The Proposals purportedly seek to pull back on this over-calibration. Vice Chair Bowman explained that the Basel III Endgame Proposal “includes modest deviations from the 2017 Basel agreement,” and that these are “designed to address U.S.-specific implementation issues.” Governor Barr, however, took a sharply different view, warning that the Proposals contain “over 20 material downward deviations from the Basel III standard,” suggesting that rather than simply removing prior gold-plating, the Agencies may have moved past the international baseline in the other direction. How the final rule lands on this question will likely be a significant focus of the comment period.
7. Accounting for Economic Growth and Inflation
A recurring theme across all three Proposals is the recognition that static regulatory thresholds and fixed calibrations can become misaligned over time as the economy grows and prices rise. The Agencies have responded to longstanding industry criticism on this point in several ways. The GSIB Surcharge Proposal would adjust the method 2 coefficients to reflect changes in the financial system and economy since 2019, and would introduce a mechanism to automatically account for economic growth and inflation going forward. Similarly, both the Basel III Endgame Proposal and the Standardized Approach Proposal would index certain dollar-based regulatory thresholds to inflation using the consumer price index, with adjustments every two years. Together, these changes reflect a broader shift toward building automatic adjustment mechanisms into the capital framework—a concept the industry has advocated for but that has been largely absent from prior rulemakings.
8. A Friendlier Capital Regime for Mortgage Markets
Both the Basel III Endgame Proposal and the Standardized Approach Proposal would eliminate the requirement to deduct mortgage servicing assets from CET1 capital, instead assigning a 250% risk weight. The Agencies explain that this change is designed to promote mortgage origination and servicing by banking organizations. In particular, Vice Chair Bowman remarked that the Proposals would “reduce incentives for traditional lending activities—like mortgage origination, mortgage servicing, and lending to businesses—to migrate outside of the regulated banking sector.” Governor Christopher Waller agreed, noting that “mortgage-related activities have largely migrated to the nonbank sector” and that he supports steps to “reduce disincentives for banks to participate.” The Agencies are soliciting comment on whether 250% is the appropriate risk weight for mortgage servicing assets, so this calibration could shift further in the final rule.
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The Proposals represent the most significant proposed recalibration of the U.S. bank capital framework since the post-crisis reforms. While the directional shift since the now-rescinded 2023 Proposals is clear, the details will matter enormously. With comments due in June, the industry has a narrow window to shape rules that could define the capital landscape for years to come. In addition, international regulators will be monitoring these developments with interest, particularly in the EU and UK where the European Central Bank and UK Prudential Regulation Authority have delayed full implementation of the Basel III endgame in response to the position in the United States. We will continue to monitor developments as the Proposals move toward finalization.
