Basel III Endgame Explained: What Changed in the 2026 US Capital Rules

The US Basel III Endgame has been one of the longest-running sagas in post-financial-crisis bank regulation, and 2026 marked its biggest turn yet: the original 2023 proposal was effectively scrapped and replaced with something far less aggressive. For finance and risk professionals tracking bank capital rules, the story is no longer "how much more capital will the largest banks need" but "how much of the original plan survived."

What changed between 2023 and 2026

The 2023 Basel III Endgame proposal would have raised capital requirements for large US banks well beyond what the international Basel Committee framework called for, and it drew sustained pushback from the banking industry over its cost and complexity. In 2026, US banking agencies formally rescinded that 2023 framework and put forward a new proposal built around an Expanded Risk-Based Approach, or ERBA, which removes the requirement for the largest banks to calculate capital under two parallel methodologies at once, a dual-calculation burden that had been one of the most criticised parts of the original plan.

How much capital requirements actually moved

The scale of the retreat is significant. Based on the agencies' own estimates, Common Equity Tier 1 capital requirements would fall by roughly 4.8% for the largest global systemically important banks (Category I and II), around 5.2% for regional banks (Category III and IV), and about 7.8% for community banks, largely through the elimination of certain deductions. For the GSIB surcharge specifically, the Federal Reserve estimates an average 40 basis point reduction, which works out to roughly $23 billion in aggregate capital, or about a 10% cut to the surcharge overall.

Who has to apply the new approach, and who can choose

The rules aren't applied uniformly across the banking sector. Category I and II banks, the largest and most systemically significant institutions, must apply the new Expanded Risk-Based Approach. Category III and IV banks can choose whether to adopt ERBA or continue under a revised Standardised Approach, giving mid-sized regional banks more flexibility than the largest GSIBs. Community banks benefit differently again, with simplified treatment and the elimination of the mortgage servicing asset deduction that had been a particular pain point for smaller institutions with meaningful residential lending books.

Why the retreat happened

The shift reflects a broader recalibration in US bank regulatory policy, driven by industry lobbying over the cost of the original proposal, concerns about competitiveness relative to international peers operating under less stringent domestic rules, and a change in the political and regulatory leadership overseeing US bank supervision. The agencies opened a public comment period on the new proposal that closed on 18 June 2026, and as of the most recent guidance, no specific effective date has been finalised; incorporation of the final rule depends on the feedback received during that comment process.

What it means for finance and risk professionals

For anyone studying or working in bank risk and regulatory capital, the practical lesson is that "final" rules in this space are rarely final, and the gap between an initial proposal and what eventually takes effect can be enormous. This matters directly for how the leverage ratio and risk-weighted capital ratios covered in our guide to the leverage ratio under Basel III interact in practice, since a lower risk-weighted capital requirement can shift which constraint actually binds for a given bank. It also sits alongside the broader international reforms covered in our guide to Basel IV's evolution, since the US Endgame proposal is effectively the American implementation path for that same international standard, just recalibrated for domestic political and competitive considerations.

FAQ

Is the Basel III Endgame the same as Basel IV? They're closely related. "Basel IV" is the informal name often given to the international Basel Committee's finalised post-crisis reforms, and the "Basel III Endgame" is the specific US implementation of those reforms, which has diverged significantly from both the international standard and its own earlier domestic proposal.

Which banks are most affected by the 2026 changes? The largest global systemically important banks (Category I and II) see the most direct impact, since ERBA is mandatory for them, but the capital requirement reductions extend across all bank categories, including community banks.

Has the 2026 proposal been finalised? Not as of the most recent guidance. The public comment period closed on 18 June 2026, and no specific effective date has yet been set for the final rule.

The Basel III Endgame's journey from an ambitious capital-raising proposal to a far more industry-friendly recalibration is a useful case study in how regulatory capital policy actually gets made: proposed, contested, revised, and only then implemented, often years later than originally planned.

How this compares with the international Basel timeline

The US recalibration doesn't happen in isolation. Other major jurisdictions have taken their own paths on implementation timing and calibration of the same underlying Basel Committee standards, with the UK and EU each running their own consultation and phase-in processes that don't always move in lockstep with the US. This divergence matters for globally active banks, which can end up managing meaningfully different capital requirements for functionally similar exposures depending on which jurisdiction's rules apply, and it's one of the reasons cross-border capital planning has become a more specialised skill within bank treasury and regulatory affairs functions over the past several years.