Remarks: Jonathan McKernan, Director, FDIC Board of Directors, at the Annual Meeting of the Association of American Law Schools

Thank you for this opportunity to speak with you today. With the new year, I thought I might use this opportunity to share what’s top of mind for me as we begin 2024.

Finalizing Endgame Reforms

Of course over much of this year we’ll all continue to discuss last July’s proposal to implement the Basel Committee’s Endgame capital standards. As I’ve said previously, I generally support efforts to enhance our regulatory capital framework. There is work to be done to improve risk sensitivity and address known weaknesses in the trading book framework, among other things.

However, I was not able to support our July proposal for two main reasons.

First, the banking regulators have not made a case for important aspects of the proposal. As I argued in my dissent and in October and December speeches, the Basel Committee did not offer any rationale for some of its key design decisions, and that has left us unable to defend or even understand important aspects of the Endgame standards that we have proposed to implement. The July proposal amounts to a big leap of faith in the Basel Committee, and if anything, the particulars of the Endgame standards should give us good grounds for skepticism and also potential grounds for some departures from those standards in our U.S. implementation.

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