South Iowa News

U.S. Representative Zach Nunn and U.S. Senator Jerry Moran, along with their colleagues, have expressed their concerns regarding the harmful impact of proposed Basel III Endgame regulations on the agriculture and energy industries. In a letter addressed to federal regulators, the members highlighted the potential negative consequences of the GSIB Surcharge Proposal and the Basel III Endgame Proposal.

The members emphasized that these regulations could result in disincentives for prudent risk management strategies and lead to increased costs of hedging for end-users. They warned that such outcomes would ultimately burden consumers who are already grappling with elevated prices due to record levels of inflation. The impact of these regulations would be felt directly at the grocery store and gas station.

Specifically, the members drew attention to the role of Futures Commission Merchants (FCMs) in facilitating risk mitigation for farmers, ranchers, and other end-users. They explained that these individuals typically initiate trades through FCMs registered with the Commodity Futures Trading Commission (CFTC). FCMs provide market access to clients through memberships at regulated derivatives exchanges and clearinghouses, with a significant number of FCMs being banks that would be affected by the proposed regulations.

The members argued that increasing regulatory capital charges for banks that provide end-users access to hedging markets and risk management tools is a misguided approach. They stressed the importance of maintaining a favorable regulatory environment that supports the agriculture and energy sectors, which are crucial for the overall economy.

This cautionary effort has garnered support from a range of organizations representing various sectors, including the American Farm Bureau Federation, National Milk Producers Federation, Louis Dreyfus Company, Commodity Markets Council, American Cotton Shippers Association, Futures Industry Association, International Swap Dealers Association, National Grain and Feed Association, and National Futures Association.

The concerns raised by Representative Nunn, Senator Moran, and their colleagues highlight the potential adverse consequences of the proposed Basel III Endgame regulations. As the debate continues, it is essential for regulators to carefully consider the implications of these regulations on the agriculture and energy industries, as well as the broader economy.