Donald Trump back in the White House, this is a real threat for international cooperation, including in terms of banking regulation. He has not yet clarified his intentions. But we cannot rule out the risk that he might work towards a withdrawal or an incomplete translation of Basel 3 finalisation into US law.
During his first term, Donald Trump relaxed parts of 2010 Dodd-Frank Act. The scope of application of Basel capital and liquidity requirements was considerably limited. The supervision framework was lightened. This loosening contributed in Spring 2023 to the difficulties met by some US regional banks which were not on the radar of supervisory authorities and ill-prepared for a strong rise in interest rates.
The Basel 3 finalisation in the US should have been an opportunity for a tightening and a larger scope of risk-weighted capital requirements. For several months, we haven't seen any progress concerning application rules. The initial version of the rules put forward by the regulators in July 2023 provoked serious criticism. The attempt to rewrite parts of these rules last September was a failure, although some relief was proposed. It revealed deep divergences of views within regulatory agencies.
As soon as he takes office, with the support of the Senate, Donald Trump could appoint new persons at the head of at least three of the four banking regulatory agencies and create a balance of power more favourable to his vision.
It is too early to say what the outcome will be but the fairness of the rules promoted by the Basel Committee at a global level could be prejudiced. The Americans have influenced the last Basel agreements by adding the principle of a capital floor and now they could attempt to avoid a strict translation of the Basel measure of operational, counterparty and market risks. When in the European Union, the final recommendations of the Basel Committee will be gradually applied from January the first.
