Better Markets Sues Fed, Bowman Over Basel III Rulemaking Process
By CU Today Staff —
WASHINGTON—Better Markets has sued the Federal Reserve and Vice Chair for Supervision Michelle Bowman, alleging private communications between Bowman and Wall Street banks “corrupted” the notice-and-comment process surrounding the Fed’s latest overhaul of Basel III capital requirements.
Reuters reported the lawsuit was filed Thursday in U.S. District Court in Washington and contends the alleged conduct deprived Better Markets of its ability to meaningfully participate in the rulemaking process, in violation of procedural protections and the Fifth Amendment.
The complaint points in part to an April Reuters report that Bowman had told executives at large banks she did not expect the industry to mount another aggressive campaign seeking additional capital relief. Reuters reported at the time that Bowman viewed the revised proposal as a balanced compromise and expected banks to keep their formal comments relatively limited after the industry had fought aggressively against the original 2023 proposal. The lawsuit also cites reporting that Bowman privately urged Wall Street leaders to support the new capital plans and stop seeking additional carve-outs.
The Fed, FDIC and OCC unveiled the revised capital package in March. The changes to Basel III, the global systemically important bank surcharge and related requirements would reduce capital requirements for affected large banks by about 4.8% in aggregate, according to Reuters, a sharp reversal from the original 2023 proposal that would have significantly increased requirements. The public comment period ended June 18, and the proposal has not been finalized. The Fed's own rulemaking docket shows hundreds of comments were submitted.
Better Markets is asking the court to require withdrawal of the proposals and a new rulemaking overseen by an official not implicated in the alleged conduct.
“This is not just some technical dispute about process,” Better Markets CEO Dennis Kelleher said, according to Reuters.
Bowman has previously said the new framework is intended to better align capital requirements with actual risks while maintaining a robust capital base and financial stability.
Originally reported by CU Today.