New Basel III Requirements Could Slow US Economy, Impact Puerto Rico
The new requirements imposed by Basel III for banks with total assets equal to or greater than $100 billion are causing concern among bankers and experts, who believe that it could potentially slow down the US economy, with repercussions eventually reaching Puerto Rico.
Basel III is based on the latest global standards issued by the Basel Committee on Banking Supervision, as a response to the subprime mortgage crisis and its global financial repercussions.
Bankers in the United States have expressed opposition to these regulations, as they will increase capital requirements by 20% or more for the largest US banks. Robert Nichols, president of the Association of American Bankers (ABA), stated in an interview with THE SPOKESMAN, “We want an adequately capitalized banking system, but we don’t want banks to have too much capital, as it can have negative economic impacts on jobs and growth across the United States.”
The Basel III agreement increases minimum bank capital requirements, introduces a leverage ratio, and imposes liquidity ratios. The implementation of Basel III has sparked protests from the Institute of International Finance and warnings from the Organization for Economic Co-operation and Development (OECD) of potential negative impacts on economic growth.
Francisco Rodríguez Castro, president and CEO of Birling Capital Advisors, believes that the regulations could lead to banks stopping services, raising prices, and affecting mortgages, loans, and savings. He emphasized that the United States and Puerto Rico could face economic repercussions due to the new requirements.
Nichols added that discussions are ongoing regarding amendments to the regulations, as a significant portion of the comments received by regulatory bodies has been critical of the proposal. If the proposed plan is completed this year, the rules would take effect in July 2025 and be fully operational by 2028.
Federal Reserve Chairman Jerome Powell acknowledged the concerns raised by stakeholders and expressed hope for broad and material changes to the proposal. Powell expressed confidence that the final regulations would garner support within the Federal Reserve and globally.