The United States' revised Basel III proposal would apply a capital charge to committed credit lines that a bank can cancel at any time without condition, bringing a capital cost to segments of wholesale and retail lending that had previously carried little or none.
Banks had broadly welcomed the March 2026 redraft for easing the overall capital burden relative to the July 2023 version, which made the treatment of undrawn, unconditionally cancellable facilities the standout exception. Because a bank can withdraw these commitments at will and they are generally not legally binding, few had expected them to attract a charge at all. Under the change, the credit conversion factor applied to these commitments would rise from zero to 10% for the purposes of the proposal's expanded risk-based approach.
The burden would land most heavily on the largest banks, particularly in fund finance and credit cards, where undrawn committed lines are a mainstay. For card exposures with no preset limit, the proposal would use the largest amount drawn over the preceding 24 months as a proxy for the undrawn exposure.
The addition forms part of the Federal Reserve's continuing implementation of the Basel III endgame, on which banks are still pressing for revisions to reduce the capital effect on their trading and lending businesses.
