Chamber cautions federal rule that impacts small business access to capital

March 2024

The Portland Metro Chamber signed on to a letter with the U.S. Chamber of Commerce and other chambers across the county to raise concerns for the proposed rule known as the “Basel III Endgame.” These proposed rules would significantly increase U.S. banks’ capital requirements, making borrowing more expensive for small businesses. Small and mid-size businesses, who are the drivers of economic growth especially in Oregon and in the Portland region, are more reliant on bank financing than other sectors. If enacted, the Basel III Endgame rule would make financing prohibitively expensive for businesses in the midst of an already challenging environment.

Small businesses across the country could see the most adverse impacts under the Basel III Endgame rule. Notably, companies that are not publicly traded are disproportionately affected through higher assigned risk weights relative to publicly traded competitors, despite similarly strong credit quality, requiring banks to hold additional capital on the loans made to small businesses. Approximately 99 percent of all U.S. companies are privately held and employ roughly half of all private sector employees.

One of the main reasons small businesses take on loans is to hire and retain workers. Higher capital requirements will likely lead to increased borrowing rates for privately held businesses, hurting their ability to hire workers and make investments. These costs could in turn be passed on to consumers and put downward pressure on economic growth and employment. Other parts of the rule, particularly the capital requirement for operational risk, will also have adverse downstream impacts on small businesses’ ability to access credit and wealth management services.

We urge that policymakers carefully consider the potential adverse effects of the Basel III Endgame rule, especially for the small business customers of banks. We implore policymakers to refrain from advancing a rule that will further constrain small businesses and complicate an already challenging economic environment.

View full letter to President Biden