US Rethinks Banking Rules, Splits From Global Basel Consensus

The seemingly placid surface of global financial regulation is fracturing, revealing a deep and consequential schism between supervisory philosophies. While the post-2008 crisis era was defined by a hard-won, if fragile, international consensus embodied by the Basel III accords, the United States is now executing a deliberate and stark pivot away from this framework.This strategic retreat from the Basel consensus is not merely a technical adjustment; it is a fundamental re-evaluation of financial risk doctrine, driven by a potent domestic political brew of industry pressure and a growing conviction that the pendulum of regulation has swung too far. The U.S. rethink, manifesting in scaled-back enforcement actions and a reluctance to implement the final, more stringent Basel III 'endgame' capital rules, creates a tangible fault line.On one side of this divide are regulators, particularly in Europe, gripped by the specter of the 2007-09 collapse, their caution forged in the fire of bank failures and taxpayer-funded bailouts. For them, any dilution of the global rulebook is an invitation for history to repeat itself, a dangerous gamble with systemic stability.On the other side, U. S.officials and banking lobbyists argue that the existing American banking system, fortified by its own post-crisis reforms, is already the best-capitalized in the world, and that layering on additional, globally-mandated capital charges would unnecessarily constrain lending and hamstring the economy. This transatlantic divergence presents a clear and present risk of regulatory arbitrage, where global banks could shift risky activities to jurisdictions with more permissive oversight, thereby concentrating systemic vulnerability.The scenario planning must now account for a fragmented regulatory landscape, where a unified front against financial contagion is replaced by a patchwork of national priorities. The long-term consequences are profound: a weakening of the Basel Committee's authority, a potential erosion of market confidence in a consistent global playing field, and the unsettling prospect that the next financial crisis will emerge from the gaps between these competing regulatory regimes.The U. S. move is a calculated risk, betting that its domestic safeguards are sufficient, but in the high-stakes world of global finance, such a bet carries the potential for catastrophic, worldwide repercussions.

#banking regulation

#Basel III

#financial crisis

#US policy

#global finance

#central banks

#featured