ABA Leads Basel Discussion on ‘Step-In’ Risk

In coordination with international trade associations, earlier this week ABA led a delegation of U.S. banks to a Basel Committee on Banking Supervision meeting on the committee’s “step-in risk” proposal, which the committee intends to address the risk that a bank would provide non-contractual financial support to nonbank financial entities. The proposal raises the possibility of a new capital requirement to capture this risk.

In addition to meeting in-person, ABA submitted a comment letter arguing that a new global capital standard for step-in risk is unnecessary and redundant in light of existing supervisory programs. After meeting with Basel Committee representatives, ABA staff now believe the chances of a new disruptive capital regime for step-in risk are significantly diminished. For more information, contact ABA’s Hugh Carney.