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House Financial Services Committee (HFSC) Chairman Patrick McHenry (R-N.C.) voiced concerns on Thursday (March 21) regarding the Basel III Endgame proposal and other initiatives that could potentially grant global governance bodies undue influence over American financial regulation.
During the HFSC’s Thursday hearing titled “Importing Global Governance: Examining the Dangers of Ceding Authority Over American Financial Regulation,” McHenry emphasized the need for greater transparency in the regulatory process.
“This hearing is essential for promoting good governance practices,” stated McHenry in his opening remarks. “Currently, there is a lack of transparency surrounding the interactions between our federal regulators and various international entities.”
McHenry highlighted organizations such as the Bank for International Settlements, the Basel Committee on Banking Supervision, and the Network for Greening the Financial System as examples of bodies exerting influence over financial regulation.
Expressing concern over the lack of visibility and accountability, McHenry referenced instances where banking officials from Russia and the Chinese Communist Party (CCP) were involved in assessing U.S. compliance with Basel rules, including conducting on-site evaluations at U.S. agencies.
“To have foreign entities overseeing our regulatory compliance is unacceptable,” remarked McHenry.
While acknowledging the potential benefits of international cooperation in setting financial market standards, McHenry cautioned against allowing such cooperation to disproportionately favor competitors over American interests.
McHenry singled out the Basel III Endgame proposal as a prominent example of federal banking agencies aligning with global directives. He argued that the proposal’s increased capital requirements could adversely impact American families, communities, and small businesses, while potentially bolstering the competitiveness of foreign financial institutions.
To address these concerns, McHenry announced the House’s intention to introduce legislation mandating clear reporting requirements for American financial regulators’ engagements with global governance groups. This legislation aims to provide greater transparency into regulatory decision-making processes.
“This initiative seeks to promote good governance practices and enhance transparency in regulatory decision-making,” McHenry affirmed.
The Basel III Endgame proposal seeks to refine risk assessment methodologies for large banks and determine appropriate capital reserves to mitigate potential losses, as reported by PYMNTS on March 7. However, the proposal has encountered significant opposition from the banking industry since its introduction in July.
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