The United States' revised Basel III proposal would introduce a capital charge on committed credit facilities that banks can cancel unconditionally, adding cost to parts of wholesale and retail lending that had largely escaped it.
Issued in March 2026, the redraft was mostly welcomed by banks for softening the overall capital impact compared with the July 2023 version. The new treatment of undrawn, unconditionally cancellable facilities came as a surprise, since such commitments are generally not legally binding. 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 heaviest effect would fall upon the largest banks in areas such as fund finance and credit cards, where undrawn committed lines are widely used. 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.
