On March 19, 2026, federal banking regulators issued the Basel III Endgame package, which comprises three coordinated proposals designed to modernize the regulatory capital framework for banking organizations. These proposals aim to recalibrate a regulatory capital framework that’s been evolving since the 2008 global financial crisis.
Because regulators explicitly designed the framework to target large, complex institutions, many smaller regional and community banks are exempt from the Basel Endgame mandates.
However, the new capital restrictions could give smaller banks a competitive edge, enabling them to maintain lower capital cushions and deploy more money into local community lending than their larger competitors. Here’s what your institution needs to know about Basel Endgame.
Basel III’s Overall Impact on Banking
The three proposals that make up the Basel III Endgame, along with recent revisions to the capital stress-testing framework, are expected to reduce capital requirements across the banking sector. The Federal Reserve Board projects that these changes will impact common equity tier 1 capital (CET1) requirements by the following percentages:
| Category I & II Firms | Category III-IV Firms | Banks with \$10B – \$100B in assets |
| -4.8% | -5.2% | -7.8% |
Inside Endgame’s Proposals
Each proposal differs fundamentally in reach and intent, targeting specific tiers of banks while aiming to achieve distinct regulatory goals. Here’s a breakdown of the scope and reach of each proposal within the Basel Endgame framework:
| Proposal | Summary | Expected Impact on Smaller Regional Banks (<\$10 billion in assets) |
| Expanded Risk-based Approach Proposal (Regulatory Capital Rule: Category I and II Banking Organizations, Banking Organizations with Significant Trading Activity, and Optional Adoption for Other Banking Organizations) |
|
None. |
| Standardized Approach Proposal (Regulatory Capital Rule: Regulatory Capital and Standardized Approach for Risk-Weighted Assets) |
|
|
| Global Systemically Important Bank (GSIB) Surcharge Proposal (Regulatory Capital Rule (Regulation Q): Risk-Based Capital Surcharges for GSIB Holding Companies; Systemic Risk Report (FR Y-15)) |
|
None. |
Implications for Smaller Regional Banks
If your bank measures capital adequacy under the CBLR framework, these proposals are not likely to have a direct impact. However, for CBLR banks that engage in mortgage servicing activities, the Standardized Approach Proposal removes the MSA deduction from capital. This change is expected to benefit banks with significant MSAs, even if they’re reporting under the CBLR framework.
If your smaller regional bank has not opted into CBLR, the Standardized Approach Proposal is expected to provide moderate capital relief, primarily through lower risk-weighted assets (RWAs), while maintaining a simple framework. Smaller regional banks using this framework will especially benefit from the lower RWAs without the offsetting effect of any AOCI inclusion requirement.
That means banks that are more heavily engaged in mortgage activities are expected to see the greatest capital relief due to the more granular risk weights based on LTV and removal of the MSA capital deduction.
The Basel Endgame Proposals offer an opportunity to model projected capital ratios under both the CBLR and Standardized Approach frameworks. While the estimated net benefit for a bank using the Standardized Approach is a 7.8% reduction in CET1, actual relief will vary significantly based on your institution’s specific asset mix. Banks should also consider recent adjustments to the CBLR framework (most notably the lowered 8% threshold effective July 2026).
Your Takeaway
These proposals, along with others recently issued, continue to modernize rules and provide relief for traditional lending activities while preserving safety and prioritizing simplicity. Lower effective capital requirements could allow for greater investment in new technologies, increased lending capacity, and increased competition throughout the industry. Amid easing capital requirements, those charged with governance of banking institutions continue to play a critical fiduciary role in managing risk and are increasingly empowered to exercise strategic flexibility.
Shifting rules offer unique opportunities — if you have the right strategy. Rehmann can help your institution move from compliance to competitive advantage. Contact our financial institutions specialists today to:
- Build your regulatory compliance roadmap: We ensure your reporting systems are fully prepared for upcoming implementation dates without disrupting daily operations.
- Answer your broader banking questions: Our team is here to guide you through any regulatory compliance or general banking topics impacting your growth.
FAQs
Q: When are these proposals expected to be implemented?
A: The proposed rule has not yet been finalized, and an implementation date has not yet been specified. All three proposals share a June 18, 2026, comment period deadline. Previous statements made by regulators have led the industry to expect a final rule by late 2026 with potential implementation in 2027.
Q: Are there any impacts to the Community Bank Leverage Ratio (CBLR) framework which result from these proposals?
A: For community banks that elect to opt into the CBLR framework, the direct impacts of these proposals are very limited, unlike recent rule changes directed specifically toward CLBR (e.g., the reduction of the CBLR requirement from >9% to >8% for Tier 1 capital to average total consolidated assets, effective July 1, 2026). For community banks that engage in significant mortgage banking activities, however, it is important to note that these proposals could remove the threshold-based deduction for mortgage servicing right assets (MSAs) from Common Equity Tier 1 (CET1) measures, even under the CBLR framework.