Large U.S. banks are subject to the most stringent capital standards and have markedly increased their capital levels - both in terms of quantity and quality – over the past decade. Raising capital requirements further inevitably comes at a cost to both the real economy and capital markets. Higher capital charges have implications for the availability and cost of credit to businesses. Policymakers should weigh these costs against the benefits before implementing the additional reforms envisioned by the Basel 3 Endgame package.


After the Global Financial Crisis, the Basel Committee on Banking Supervision - the global standard-setting body for banking regulation - as well as otther standard setters such as the Financial Stability Board (FSB) and national authorities instituted a series of wholesale reforms to the pre-crisis prudential regulatory framework to increase both the quality and quantity of capital in the banking system.

What is capital?


This resulted in a sweeping set of revisions, including:

  • Heightened risk-based capital requirements for trading (capital market) activities;
  • Heightened risk-based capital requirements for lending activities;
  • New leverage-based capital requirements;
  • New capital requirements for Global Systemically Important Banks (GSIBs); and
  • The introduction of capital stress testing requirements.

In addition, the Basel Committee, other standard setters such as the FSB, and national authorities instituted a bevy of other reforms that complement stricter capital requirements:

  • New minimum liquidity requirements;
  • New margin requirements;
  • New leverage-based capital requirements;
  • Single counterparty credit exposure limits;
  • Strict limits on proprietary trading
  • Mandatory central clearing;
  • New mechanisms to ensure orderly resolution of financial firms, such as Total Loss Absorbing Capacity (TLAC) and resolution planning requirements;
  • Streamlined corporate structures and business models; and
  • Enhanced ongoing supervision of large banks.


The Basel Committee made substantial changes to Basel 3 aimed at further reducing the excessive variability across capital requirements and ensuring that all banks are subject to a comparable minimum level of required capital. Unless carefully implemented by U.S. regulators, these changes, known as the “Basel 3 Endgame” or “Basel 3 Finalization,” could significantly increase U.S. banks’ capital requirements above their already historically high levels.


  • Today, U.S. bank capital levels are extraordinarily robust (both in terms of overall levels and quality of capital).
  • For example, the average of large U.S. banks’ Common Equity Tier 1 (CET1) capital ratios and levels grew in excess of 88% since 2009. CETI is considered the highest quality of regulatory capital.
  • Recent research indicates capital at the largest U.S. banks is “optimal” – that is, capital levels that achieve an appropriate balance between financial stability and economic costs. The largest banks weathered COVID-19 and its associated severe market stresses, while also continuing to support the capital markets and the real economy, underscoring the strength of their capital position.

June 2023

U.S. banking agencies propose a rule to implement the Basel 3 Endgame framework in the United States. The proposal is out for comment until January 16, 2024.