Rep. Kim Questions BPI's Baer on ABL Risk Differentiation in Basel III Reproposal and Urges Tweaks to Basel Proposal

At yesterday's House Financial Services Committee hearing, "Prioritizing Main Street: Evaluating the Impact of Capital Proposals on Economic Growth and American Communities,” Representative Young Kim (R-CA) questioned Bank Policy Institute President and CEO Greg Baer on the treatment of asset-based lending under the Basel III Endgame reproposal issued by the federal banking agencies in March 2026.

Rep. Kim, who has met with SFNet in our offices on this issue, opened by citing financial data showing that ABL exhibits lower loss-severity factors than other forms of secured exposure, and asked Baer whether the lack of differentiation between ABL and other secured exposures could be improved in the Basel III proposal.

Baer agreed. He noted that lending against inventory and accounts receivable carries less risk than unsecured lending. He pointed out that the Federal Reserve recognizes this distinction in its stress testing framework, but the current Basel reproposal does not, treating ABL as if it were unsecured. Baer said ABL should receive some recognition under the rule, that the agencies will need to do additional work to determine the appropriate calibration, and that BPI wants to help them get there.

Rep. Kim closed by saying there is a lot to like in the new Basel proposal, but this is one area where small tweaks would lower costs for borrowers over the long term.

SFNet has been working with the regulatory agencies, Congress, and stakeholders to ensure a final proposal appropriately calibrates the risk weighting of ABL.

You can view the relevant part of the hearing here, around the 2:19 mark.