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HFSC Chairman Patrick McHenry Calls for Transparency in Financial Regulation

Congress

House Financial Services Committee (HFSC) Chairman Patrick McHenry (R-N.C.) said Thursday (March 21) that the Basel III Endgame proposal and other projects threaten to give global governance bodies authority over American financial regulation.

This threatens to weaken the country’s standing on the global stage, McHenry said in opening remarks delivered before the HFSC’s Thursday hearing, “Importing Global Governance: Examining the Dangers of Ceding Authority Over American Financial Regulation.”

“This hearing is a good governance exercise,” McHenry said in his remarks. “Currently, there is little visibility into the dealings between our federal regulators and a complex network of international bureaucrats.”

McHenry pointed to the Bank for International Settlements, the Basel Committee on Banking Supervision, and the Network for Greening the Financial System, for example.

The lack of transparency and accountability is concerning because as recently as 2017, banking officials from Russia and the Chinese Communist Party (CCP) were checking U.S. compliance with Basel rules, at times on site at U.S. agencies, McHenry said.

“That is absurd,” he added.

“To be clear, international cooperation can be positive and help set clear rules of the road for financial markets,” McHenry said. “However, when the scale repeatedly tips in favor of our competitors, we have a problem.”

He said the Basel III Endgame proposal is “the most glaring example” of federal banking agencies taking cues from global bodies.

That proposal’s increased capital requirements would impact families, communities and small businesses, and the proposal itself would make foreign financial institutions more competitive, at the expense of American ones, McHenry said. 

The House will consider a bill that will create clear reporting requirements for American financial regulators’ dealings with global governance groups, providing insight into their dealmaking, McHenry said.

“So, overall, I think this should be a good governance operation and for us to get insight into how these regulators are making decisions,” McHenry said.

The Basel III Endgame proposal aims to refine the way large banks assess risk and determine the necessary capital reserves to safeguard against potential losses, PYMNTS reported March 7.

The proposal has faced considerable pushback from the banking industry since its introduction in July.