Is it all over for Basel 3.1 (or what is known in the United States as the “Basel Endgame”)? Should we kiss goodbye the Basel Committee and the very idea of global banking-supervision accords that establish minimum capital requirements? Many informed people think so. The committee’s recommendations have long been assailed from all sides, especially the western shores of the Atlantic.

In 2023, emboldened -- or perhaps stung -- by the failures of Silicon Valley Bank and a few other mid-size institutions, the US Federal Reserve proposed a tough interpretation that would have increased capital requirements for American banks by 19 percent, on average. But pushback from the financial industry, led by Jamie Dimon of JPMorgan, was fierce, with Super Bowl halftime commercials warning Americans that small firms and middle-class households would pay the price for such a policy.

So the Fed backed off, reconsidered its position, and devised new proposals that would have halved the impact of its original recommendations. But these watered-down measures are also in doubt. Even before Donald Trump’s impending return to the White House had raised the possibility of changes in personnel, the Federal Deposit Insurance Corporation was signaling that it would not back them.

Meanwhile, those who oppose any foreign entanglements that could tie up the US financial system have been emboldened. Steve Forbes, of the eponymous magazine, argues that, “One of the first tasks of the Trump Treasury Department should be to abandon the Basel regime of banking regulations.” And Gene Ludwig, a former comptroller of the currency, has suggested that “the Basel endgame rule could be completely dead.”

Nor is the climate for rule-makers much more favorable in Europe. French President Emmanuel Macron has told the European Commission that, faced with this American backsliding, it needs to rethink its Basel 3.1 implementation plans: “(The EU) cannot be the only economic area in the world that applies (it).” With European banks losing market share in Europe to the Americans, the issue has become politically sensitive.

Even the Bank of England is under pressure. It played a key role in launching the Basel Committee back in the 1980s, and it normally sticks closely to the agreements reached there. But Britain’s new Chancellor of the Exchequer has argued that regulators should be doing more to promote competitiveness and growth. Further increases in bank capital, especially for lending to small businesses, are hard to reconcile with that objective.

The Basel Committee’s new chair, Erik Thedeen of the Swedish central bank, has his work cut out for him. Can he keep the show on the road? One problem is that there is very little international agreement on the facts. You would think that the simple question of whether US banks will be as well capitalized as EU banks after the implementation of Basel 3.1 would have a straightforward answer. But that is far from the case.

US banks think that the Fed’s proposals would put them at a competitive disadvantage, whereas Macron thinks the opposite. European banks regularly point to a 2023 Oliver Wyman report showing that big EU banks have a Common Equity Tier 1 ratio (the main comparable measure of bank capitalization) more than 3 percentage points above that of their US counterparts.

But the plot has thickened. The Financial Times reports that the European Central Bank’s own research comes to the opposite conclusion: “Capital requirements for big EU lenders would rise by a double-digit percentage if they had the same rule as their large Wall Street rivals.” Unfortunately for those who seek the truth, the ECB is split on whether to publish its paper, which remains under wraps in Frankfurt. The political awkwardness of the situation is obvious.

It is surprising for a process that began just after the global financial crisis to have reached an impasse at such a late stage. The core provisions of Basel III were first published in November 2010, after a very rapid work program, and the latest iteration was presented as a mere “tidying up” exercise. But it is proving more contentious than the main accord.

Part of the problem is that the political impetus for reform has waned. The driving force was the G20, which forced regulators to move fast and break things after the crisis. But we heard very little about Basel at the group’s summit in Brazil this month. Apparently, the financial crisis is being consigned to history.

This is unfortunate, and regulators will undoubtedly say that reports of Basel’s death have been much exaggerated. But unless the patient receives urgent attention, he may well expire. Sooner or later, countries that have already implemented the new rules -- such as Australia and Singapore -- will begin to cry foul, whereupon the process could unravel entirely.

In any case, the US, the European Union, and the United Kingdom will be obliged to call a time-out over the northern winter. The US will have a new Treasury secretary, Scott Bessent, and the EU a new commissioner for financial markets, Maria Luis Albuquerque. Both will need to get settled in. But they also will need to get together soon. The stakes are high, and the situation resembles Samuel Beckett’s “Waiting for Godot” more than his “Endgame.” Godot had better turn up soon.

Howard Davies

Howard Davies, a former deputy governor of the Bank of England, is chairman of NatWest Group. The views expressed here are the writer’s own. -- Ed.

(Project Syndicate)