ELFA Submits Comments on Basel III Regulatory Capital Rule

Earlier today, ELFA submitted comments to the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) on the joint Basel III capital rules proposal, focusing on provisions that would directly impact asset-based lending. The letter highlighted three key areas of concern: proposed changes to credit conversion factors (CCFs) for commitments, the revised definition of a "commitment," and the lack of differentiating or recognition of value of non-financial collateral. Under the proposal there would be a uniform 40% CCF for non-unconditionally-cancelable commitments, regardless of maturity, and for Category I and II banking organizations, unconditionally-cancelable commitments would receive a 10% CCF. This is a significant change from current standardized approach where commitments that are non-unconditionally-cancelable with an original maturity of one year or less receive a 20% CCF, those with maturity of more than one year receive a 50% CCF, and unconditionally-cancelable receive a 0% CCF. ELFA also raised concerns about the revised and broadened definition of "commitments" and recommended revisions to the proposed language. Finally, ELFA also emphasized the important distinction between financial and non-financial collateral and the need to appropriately assess and value non-financial collateral when evaluating risk. Under the current framework, banks rely on established internal controls and valuation methodologies to determine asset values. If the agencies intend to move away from this approach, ELFA urges them to commit to a formal data-gathering process in the final rule, evaluate the resulting findings, and consider any further policy changes only after a comprehensive review of the data. ELFA partnered with SFNet on this effort and, together, the organizations released a joint statement following the submission. White House Releases AI Executive Order At the beginning of June, President Donald Trump signed Executive Order 14409 , titled "Promoting Advanced Artificial Intelligence Innovation and Security," to advance AI innovation while strengthening cybersecurity protections. The order establishes a voluntary framework for AI developers to share advanced models with the government for security review and encourages public-private collaboration to identify and address cybersecurity risks associated with emerging AI technologies. The executive order directs the development of a classified process to evaluate advanced AI models and assess potential security risks. It also calls on the Department of Justice to prioritize enforcement efforts against individuals who use AI to facilitate criminal activity, including data theft, fraud, and other cyber-related offenses. Congress Ramps up Attention on AI ELFA continues to track policy around AI and engage with lawmakers as the conversation around potential federal regulation continues to develop. On June 4, Representatives Jay Obernolte (R-CA) and Lori Trahan (D-MA) released a discussion draft of the "The Great American Artificial Intelligence Act of 2026," creating a bipartisan federal framework for regulating AI. The draft aims to address key policy considerations, including data privacy, workforce impacts, and protections for children. It also includes a controversial provision that would preempt state laws applicable to AI developers. Within that broader effort, this legislation tackles financial crimes in Section 131, which would strengthen federal fraud statutes by increasing penalties for certain fraud offenses and creating additional penalties for crimes committed with the assistance of AI. The provision is intended to provide stronger deterrence against AI-enabled fraud schemes, including impersonation, identity-related crimes, and other malicious uses of AI. While questions remain regarding how overlapping penalty provisions would be applied, it does highlight that enforcing agencies of these financial crimes would not change and would still involve the FBI, Secret Service, FinCEN, and US Attorney's Offices. This enhanced enforcement framework reflects growing concerns around the misuse of AI technologies. On June 11, the Senate Banking Committee held a hearing entitled, "AI and the American Dream: Promoting Innovation, Affordability, and American Dominance." During the hearing, senators discussed potential national security implications; workforce displacement; cybersecurity concerns; rising fraud utilizing AI and efforts in the financial services industry to combat it; energy issues; and efforts to invest in AI infrastructure. Ranking Member Sen. Elizabeth Warren (D-MA) expressed concerns about market exposure associated with AI companies and the potential for market instability to trigger losses across the financial system. Administration Appoints Brian Johnson to be next Director of the CFPB Last week, Brian Johnson was nominated to serve as Director of the Consumer Financial Protection Bureau (CFPB). Johnson previously served as the Bureau's Deputy Director during President Donald Trump's first administration (2018–2020) and brings experience from both private-sector banking policy roles and his tenure as a congressional staffer on the House Financial Services Committee. If confirmed by the Senate, Johnson would succeed Acting Director Russell Vought, who has led the CFPB since February 2025. The nomination may signal a shift in the Administration's approach to the Bureau, suggesting a more defined path forward for the agency and its role in consumer financial regulation, in contrast to Vought's previously stated goal of "closing down the agency." ELFA released a statement after Johnson's nomination and will provide further updates as the Senate's confirmation process progresses.

Advocacy

FEDERAL

LEGAL

STATE

Research

FINANCIAL INSIGHTS

ACTIONABLE ANALYSIS

Education

CURRICULUM

TRAINING & DEVELOPMENT

COMMUNITIES

Events

ELFA Submits Comments on Basel III Regulatory Capital Rule

Member Exclusive Content

Our site uses cookies