The Basel 3 “Endgame” Explained – Not the RV/GCR Event We’ve Been Led to Believe

There’s been much hype in GCR Land about the Basel 3 “Endgame”. It’s been framed as a turning point in Our GCR as much as SOFR and FedNow were. Yet here we are, still waiting for anything significant to change.

Unfortunately, and with much disservice to our GCR Land community, many RV/GCR “information providers” throw these terms and events out there with little explanation or context. In the end, all this does is place additional confusion and anxiety onto an already difficult GCR landscape. This is unfortunate, so let’s figure this out together without the Hopium or hype.

So What is the Basel 3 “Endgame” All About?

Regulatory agencies have recently unveiled a proposal to fortify the banking system by making modifications to capital requirements for large banks. This substantial endeavor, known as the Basel III endgame, seeks to increase the strength and resilience of the financial sector. By better reflecting underlying risks and enhancing risk measurement consistency, the proposal aims to safeguard against future turmoil and ensure a more stable banking environment.

Why the Word “Endgame”?

The term “endgame” is used to describe the final phase or iteration of the Basel III regulatory framework. It signifies that the proposed changes represent the culmination of a long process that began after the global financial crisis of 2007-2009.

The initial Basel III standards were implemented to address weaknesses in the banking system that were exposed during the crisis. Over the years, regulators have worked to refine and enhance these standards, leading to the development of the Basel III endgame.

The term “endgame” suggests that the proposed changes in the endgame phase are the last set of modifications needed to achieve the desired objectives of Basel III. It signifies that regulatory agencies believe the proposed adjustments will provide the necessary strength and resilience to the banking system, effectively concluding the regulatory efforts that started after the financial crisis.

In essence, “endgame” is a term used to indicate that the proposed changes represent the final stage of a comprehensive regulatory process, aimed at solidifying the banking system and reducing the likelihood of future financial crises.

The Basel 3 Endgame has had a Long Timeline

• 2007-2009: The global financial crisis occurs, prompting the need for regulatory reforms.
• 2017: The final iteration of Basel III, known as the Basel III endgame, is agreed upon.
• 2018-Today: Proposal Comment Period: Stakeholders and the public have an opportunity to provide comments on the proposal, allowing for feedback and refinement. Regulatory agencies collect data and analyze feedback to further refine and assess the impact of the proposed changes.
• November 30, 2023: The comment period for the Basel III endgame proposal closes, marking the deadline for submitting comments.
• 2023-2025: Banks start preparing for the implementation of the proposed changes, ensuring compliance with the new requirements.
• July 1, 2025: Large banks begin transitioning to the new framework outlined in the Basel III endgame proposal.
• July 1, 2028: Full compliance with the new framework is expected to be achieved by this date, marking the completion of the Basel III endgame.

The Basel 3 Endgame in Non-Financial Terms

In simpler terms, the Basel III endgame proposal is a comprehensive plan to strengthen the banking system and make it more resilient. By implementing modifications to capital requirements and risk measurement, regulators intend to ensure that banks are better prepared to weather financial downturns. The proposal aims to create a safer financial environment, reducing the likelihood of future banking crises and promoting stability in the global economy.

By adhering to a standardized framework and considering the risks associated with various activities, regulators aim to create a more stable banking environment, ultimately benefiting the overall economy and safeguarding against future financial turmoil.

Now you know – and knowledge is Power.