During a recent government meeting, CIFMA (the Securities Industry and Financial Markets Association) raised significant concerns regarding the proposed Basel 3 in-game regulations. The organization highlighted that the new capital requirements could lead to a staggering 129% increase in capital levels for large banks' trading activities, which they argue does not accurately reflect the underlying risks associated with these activities. CIFMA warned that such increases could have detrimental effects on the real economy, citing a PWC study that estimated a potential decline in US economic growth by up to 25% over the past decade if the original proposal had been implemented.

The meeting also addressed the recent comments from Federal Reserve Vice Chair Barr, who indicated the agency's intent to re-propose both the Basel 3 in-game rule and the related GSIB (Global Systemically Important Banks) surcharge rule. CIFMA welcomed this move as a positive step but expressed concerns that the reproposal might still raise capital levels by an additional 9% for the largest US banks, which are already comparatively high by international standards.

CIFMA emphasized the importance of addressing several key recommendations in the reproposals, including the need to resolve overlaps with stress tests and other capital requirements, and to provide greater credit for diversification in the Fundamental Review of the Trading Book (FRTB). They also urged for favorable treatment for commercial end users of over-the-counter derivatives, aligning with approaches taken by the European Union.

In addition to the Basel 3 discussions, CIFMA called for reforms in the stress testing process and voiced concerns over the FDIC's recent proposal to revise regulations surrounding broker deposits related to broker-dealers. The organization underscored the critical nature of these rulemakings for the economy and urged policymakers to ensure they are executed correctly. The meeting concluded with a commitment to further discuss these pressing issues.