Industry Groups Ask Regulators to "Recalibrate" Basel III Rule Proposal

Financial-industry associations urged federal banking regulators to recalibrate their 2026 Basel III endgame capital proposals.

In comments on the joint rulemaking proposal, ISDA, SIFMA, and the Institute of International Finance argued that the proposed treatment of trading, derivatives, and securities financing would push capital requirements above the underlying economic risk. Citing a study with the eight U.S. global systemically important banks, the associations said the proposed "Fundamental Review of the Trading Book" would raise market-risk RWA by 89 percent under its standardized approach, or 30 percent under a blend of internal models and the standardized approach. They asked the agencies (i) to better recognize hedging, netting, and diversification, (ii) to ease the default-risk capital treatment of equity hedges, sovereign exposures, and funds and (iii) to set an implementation date no earlier than January 1, 2028.

In separate comments, the International Capital Market Association ("ICMA") and the International Securities Lending Association ("ISLA") focused on securities financing under the proposal. The groups asked the agencies to recognize cross-product netting under an industry master agreement to combine securities-lending, repo, and derivatives contracts "into a single legal netting set." ISLA urged recognition of bankruptcy-remote pledge structures under its "Pledge GMSLA" documentation, arguing that segregated, non-rehypothecatable collateral does not expose a bank to its counterparty.