Basel III Endgame Proposal Could Undermine U.S. Clean Energy And Infrastructure Policy (October 2023)
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On July 27, 2023, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, issued a notice of proposed rulemaking that would implement the remaining elements of the Basel III Accord (colloquially known as the “Basel III Endgame”) into the U.S. bank capital framework. The Proposal revises the capital requirements applicable to large banking organizations (those with total assets of $100 billion or more) and banking organizations with significant trading activity. Among the proposed revisions is a significant increase in the risk weight assigned to non-publicly traded equity exposures, including certain tax equity investments. This change, if adopted, would make it prohibitively expensive for banks to make certain tax equity investments, which, given the substantial participation of banking organizations in this market, is certain to have a harmful, albeit likely unintended, impact on the financing of clean energy and infrastructure projects.
