The undersigned chambers of commerce and businesses across the United States are concerned about the proposed rule known as the “Basel III Endgame” that would substantially increase capital requirements on covered U.S. banks and make capital and credit more expensive for businesses of all shapes and sizes.  Small and mid-size businesses, who are the drivers of economic growth, are more reliant on bank financing than other sectors of the economy.  If enacted, the Basel III Endgame rule would make financing prohibitively expensive for businesses in the midst of an already challenging environment.

We ask that you urge federal banking regulators to study the costs of and then repropose the Basel III Endgame rule given it stands to hamstring access to capital and credit, the essential lifeblood that fuels the vitality of every business.

A recent Chamber survey of 300 treasurers and financial decision-makers revealed that 68% of business owners believe that a net increase in bank capital requirements could be detrimental to their business.  Furthermore, the survey found that an alarming 87% of businesses have been negatively impacted by cost increases resulting from financial regulation, including 46% of companies that have delayed or canceled planned investments or capital expenditures due to financial regulations.

Small businesses could see the most adverse impacts under the Basel III Endgame rule.  Notably, companies that are not publicly traded are disproportionately affected through higher assigned risk weights relative to publicly traded competitors, despite similarly strong credit quality, requiring banks to hold additional capital on the loans made to small businesses.  Approximately 99 percent of all U.S. companies are privately held and employ roughly half of all private sector employees.  One of the main reasons small businesses take on loans is to hire and retain workers. Higher capital requirements will likely lead to increased borrowing rates for privately held businesses, hurting their ability to hire workers and make investments.  These costs could in turn be passed on to consumers and put downward pressure on economic growth and employment. Other parts of the rule, particularly the capital requirement for operational risk, will also have adverse downstream impacts on small businesses’ ability to access credit and wealth management services.

Policymakers must carefully consider the potential adverse effects of the Basel III Endgame rule, especially for the small business customers of banks.  We implore policymakers to refrain from advancing a rule that will further constrain small businesses and further complicate an already challenging economic environment.

Thank you for your consideration and we stand ready to discuss these issues in greater detail.