Coalition Letter on American Consumer Institute – Risk Transfer

Chief Counsel’s Office

Attention: Comment Processing,

Office of the Comptroller of the Currency

400 7th Street SW, Suite 3E–218

Washington, DC 20219

Ann E. Misback


Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW

Washington, DC 20551

James P. Sheesley

Assistant Executive Secretary

Attention: Comments/Legal OES (RIN 3064–AF29)

Federal Deposit Insurance Corporation

550 17th Street NW

Washington, DC 20429

Re:  “Regulatory Capital Rule: Large Banking Organizations and Banking Organizations With Significant Trading Activity”; Docket ID OCC–2023–0008 (OCC); Docket No. R–1813, RIN 7100–AG64 (Board); and RIN 3064–AF29 (FDIC)

To Whom It May Concern:

Reducing risk for banks and taxpayer exposure while not limiting access to credit and increasing the cost of credit for bank customers, such as homebuyers, small businesses, and manufacturers, should be of paramount importance to your agencies as you work to implement the Basel III Endgame and reshape capital regulations for large banks.  Unfortunately, your proposal omits Basel III Endgame reforms, such as clarifications and incentives that would allow and encourage banks you regulate to use insurance and reinsurance credit risk transfer, which would help achieve this balance. 

CRTs effectively serve as a private capital buffer to protect taxpayers from the underlying credit risks.  In the U.S., highly regulated, well-capitalized and diversified insurers and reinsurers should clearly play a role in distributing bank credit risk, as they have done in the U.S. for the private sector (except for banks), state programs, the National Flood Insurance Program, the Export-Import Bank of the U.S., and Fannie Mae and Freddie Mac.  Insurers and reinsurers are highly regulated financial institutions and the risks they assume in their portfolios and investments are not aligned with those of banks, demonstrating why they would be a reliable source of countercyclical capital, help diversify and protect banks’ balance sheets, and protect U.S. taxpayers.  Other countries that have implemented Basel III Endgame already allow their banks to use insurance and reinsurance credit risk transfer, putting banks in the U.S. that your agencies regulate at a competitive disadvantage.

Consumers, taxpayers, and banks do not need another financial crisis that results in another era of taxpayer-funded bank bailouts.  They need a system of banking regulation that has both strong and effective rules and regulatory oversight, reduces risk and volatility, gives consumers access to capital and capital that is affordable, and includes checks and balances and cost efficiencies – all of which the private sector can bring to bear.  Your agencies should enhance the ability of banks to secure third party analysis and distribute risk to a variety of reliable, private sector sources, including insurers and reinsurers.  The agencies’ capital regulations for banks should welcome and go so far as to encourage this by clarifying and calibrating capital requirements in a way that would facilitate a robust insurance and reinsurance credit risk transfer market, supporting the continued stability, efficiency, and transparency of banks.

Please make the necessary modifications to your proposal so that banks your agencies regulate and to which your final proposal would apply can use and have an incentive to use insurance and reinsurance credit risk transfer.

Steve Pociask
American Consumer Institute

David Williams
Taxpayers Protection Alliance

John Berlau
Director of Finance Policy
Competitive Enterprise Institute

Saulius “Saul” Anuzis
60 Plus Association

George Landrith
Frontiers for Freedom

Adam Brandon

Ray Lehmann
Editor In Chief
International Center for Law & Economics
(For identification only)

Grover Norquist
Americans for Tax Reform

Jerry Theodorou
R Street Institute

Douglas Holtz-Eakin
American Action Forum
(For identification only)

James L. Martin
60 Plus Association

Mario H. Lopez
Hispanic Leadership Fund

Pete Sepp
National Taxpayers Union

Gerard Scimeca
Consumer Action for a Strong Economy