Tomorrow, November 7, at 10 AM ET, the Subcommittee on Financial Institutions and Monetary Policy will hold a hearing on the United States’ position in global financial regulation. Part of the House Financial Services Committee, the hearing is entitled, The Tangled Web of Global Governance: How the Biden Administration is Ceding Authority Over American Financial Regulation.
The witnesses are as follows:
- Thomas Hoenig, Distinguished Senior Fellow, Mercatus Center, George Mason University
- Prof. Christina Parajon Skinner, Assistant Professor of Legal Studies & Business Ethics, Wharton School, University of Pennsylvania
- Bryan Bashur, Director of Financial Policy, Americans for Tax Reform
- Renita Marcellin, Advocacy and Legislative Director, Americans for Financial Reform
The hearing memo states:
“U.S. financial regulators, including federal banking agencies, have, in effect, increasingly ceded portions of their authority to international and domestic intergovernmental organizations. This has decreased transparency in development of U.S. regulatory frameworks and reduced regulators’ accountability. As a result, U.S. federal banking agencies and the global governance organizations remain opaque and unaccountable to Congress and the American people. This hearing will allow the Subcommittee to better understand the contents of those agreements and the responsibilities assumed by banking agencies and their staff.”
Mentioned specifically is Basel III implementation and issues like climate risk – part of a the trendy ESG or Environmental, Social and Governmental category in financial services.
Basel III is about applying global standards for big banks and how they manage capital in terms of risk. Some groups are concerned about the new requirements that Basel III will implement. The US Chamber of Commerce recently stated that “federal banking regulators in Washington, D.C. may soon increase bank capital requirements that could harm businesses and, by extension, the American economy” under Basel III.
The Chamber references a report that claims:
“To meet higher capital requirements, banks may reduce their trading inventories, thereby lowering market liquidity.” This means, for example, it could be more expensive for banks to provide liquidity in the corporate bond market, which will increase the cost of financing for these businesses. The report also finds that requiring banks to increase capital for their trading activities will make it more expensive for businesses to hedge market risk, such as foreign exchange risk and interest rate risk.”
So a reduction in risk may drive prices higher which would then possibly filter over to consumers.
You may also expect the Q&A to veer into areas of Fintech – such as digital assets.
The hearing will be live-streamed on the Committee website.