The Basel endgame re-proposal: lower capital, one calculation

why_it_matters

→Capital freed at the largest banks will be redeployed into lending, buybacks or acquisitions; the choice will show up in strategy within a year.

→Moving from two capital calculations to one reduces model and reporting complexity, which is a technology saving as much as a capital one.

→Bringing unrealised securities losses into capital for large regionals closes the gap exposed in 2023, and makes interest rate risk management a capital issue.

Six months after I wrote about the Basel endgame reboot, the proposals have arrived. On 19 March 2026 the US banking agencies requested comment on three rules: a revised Basel III framework for the largest banks, changes to the standardised approach used by most banks, and a new method for the G-SIB capital surcharge^[1]. Comments are due by 18 June 2026.

The agencies say capital would "modestly decrease" overall, while remaining substantially higher than before the financial crisis. Law firm Arnold & Porter's reading of the agencies' estimates puts the reduction in CET1 requirements at about 4.8% for covered depository institutions and 6.4% for covered holding companies, with G-SIB surcharge changes cutting their CET1 requirements by about 3.8%^[2].

The three changes that matter most

One calculation, not two. The largest banks would move to a single set of capital calculations, with market risk rules applying only to banks with significant trading.
Lending treated more in line with risk. New mortgage risk weights, from 25% to 110% depending on loan-to-value, are estimated to cut mortgage risk-weighted assets by about 30%.
Unrealised losses count. Category III and IV banks would include most accumulated other comprehensive income in CET1, phased in over five years.

What most commentary misses

The capital relief will get the headlines. The AOCI change deserves more attention from large regional banks. Once unrealised losses on securities flow into capital, the size and duration of the securities portfolio becomes a capital decision, not just a liquidity and earnings one. Treasury, finance and risk teams will need to run interest rate scenarios through capital ratios monthly, and the systems that do that quickly will be an advantage.

There is also a technology dividend. Retiring a second capital calculation removes models, data feeds and reconciliations that have cost the largest banks years of effort.

What to do

Recalculate capital under the proposals before the comment deadline, and respond where the calibration matters to your business. Then make the harder decision: where the freed capital goes. Lending growth, technology investment, buybacks and acquisitions will all compete for it.

So what, for…

banksRecalculate capital under the proposals now, and decide where freed capital goes before investors decide for you. Category III and IV banks should model AOCI volatility.

fintechsLower mortgage and lending risk weights make bank balance sheets more competitive for credit you currently originate.

regulatorsThe AOCI phase-in period is when rate shocks would expose banks that have not adjusted their securities portfolios.

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