SFNet Submits Basel III Comment Letter

SFNet has submitted a comment letter to federal banking regulators outlining key concerns with the Basel III capital proposals and their potential impact on asset-based lending. Read the letter here.

While the revised proposal includes some positive changes, it continues to fall short in recognizing the risk-mitigating value of nonfinancial collateral—such as receivables, inventory, and equipment—which is fundamental to the ABL model. As drafted, the rules could treat well-secured ABL loans similarly to unsecured exposures for capital purposes.

SFNet also raised concerns about increased credit conversion factors and a broader definition of “commitment,” both of which could drive up capital requirements and discourage banks from participating in ABL facilities—particularly as administrative agents.

The proposals would revise the capital framework governing how banks weight secured, collateral-backed credit, affecting our membership both directly and indirectly across bank and non-bank asset-based lenders.

In addition, SFNet has partnered with the Equipment Leasing & Finance Association (ELFA) on a joint statement reinforcing shared concerns:

Given the significant overlap in membership and market participation, both organizations emphasized the broader impact these proposals could have across secured finance and equipment finance markets.

Why this matters for members: These changes could increase the cost and reduce the availability of ABL financing, especially for the small and mid-sized businesses that rely on it for working capital.

SFNet is urging regulators to make targeted revisions to better reflect the true risk profile of ABL. If you have any questions, contact Michele Ocejo at mocejo@sfnet.com.