The U.S. and the Basel Endgame: Distancing or Decoupling?

The response to the 2008 financial crisis followed the post-World War II geoeconomic playbook of multilateral consensus and coordination. The Financial Stability Board, the G20’s 2009 reboot of the decade-old Financial Stability Forum, set in motion far-reaching regulatory reforms including a new bank capital regime, Basel III.

Finalized in 2017 under the aegis of the Basel Committee on Banking Supervision – a multinational body born of an earlier crisis (the 1974 Herstatt Bank failure) – Basel III remains in a protracted “endgame” implementation phase. While the global hierarchy persists in stressing the importance of completion, frictions are emanating from the United States.

Big U.S. banks have consistently complained that Basel III would unnecessarily reduce financing and intermediation capacities and harm their global competitiveness. Under pressure last year, toward the end of the Biden administration, the top federal regulators began discussing the possibility of revisiting their 2023 proposal. The new Trump administration, in addition to deregulatory leanings, brought an “America first” attitude into international...