The United States' revised Basel III proposal largely bypasses one of the Basel Committee's most significant post-crisis reforms: the output floor. Under the international Basel III framework agreed in 2017, the output floor limits how far a bank's internally modelled risk-weighted assets can fall below those produced under the standardised approach, with the floor being phased in to 72.5% by 2028.
The US proposal takes a different route. Rather than relying on an output floor to constrain internal models for credit risk, it would require the largest banks to calculate credit risk using a single standardised framework, removing internal-model calculations for that risk altogether. For market risk, where internal models remain available, the proposal also departs from the Basel standard by not adopting the 72.5% output floor.
The Basel Committee's 2017 framework also restricts where the most advanced internal ratings-based (IRB) approach may be used, including exposures to banks, other financial institutions and large corporates with consolidated annual revenues above €500 million. Those restrictions remain part of the international framework, but the US proposal instead adopts a different implementation approach.
The changes form part of the Federal Reserve's continuing implementation of the Basel III endgame, alongside the wider package of proposals published in March 2026.
