From the desk of Stevie Baron:

Small businesses embody the American Dream — creating jobs, serving neighborhoods, and helping local economies grow. As the country’s leading lender to small businesses, Chase serves more than seven million small businesses across the country. Our team at Chase for Business hears directly from small business owners every day about the difference access to capital can make, helping them manage cash flow, invest in growth, hire employees, and pursue their ambitions with confidence.

Capital allows a restaurant to open a second location, a manufacturer to buy equipment, or a retailer to make payroll during a slow month. That’s why the rules governing how banks lend, and how much capital they are required to hold against those loans, matter well beyond bank balance sheets. They affect whether credit is available, affordable, and flexible enough for small businesses to grow.

Why capital rules matter on Main Street

As regulators finalize the Basel III Endgame and Global Systemically Important Bank (GSIB) surcharge frameworks, the objectives should be clear: preserve the strength of the banking system while ensuring capital rules are tied to actual risk, which will support access to credit for small businesses.

We support strong capital standards: they make the banking system more resilient, protect customers, and allow banks to lend through times of stress. The latest revisions to the 2023 proposal are a step in the right direction, but as we reiterated to regulators, more work is needed to ensure the final rules do not increase the cost of lending or reduce access to credit for small businesses.

The GSIB surcharge is a textbook example of how regulation influences capital flowing to American small businesses. At first blush, it seems technical and removed from what matters for Main Street. However, in practice, the Federal Reserve’s proposed changes will impact every loan a GSIB makes. As proposed, the Federal Reserve would incentivize trading activity over lending to small businesses and customers, which will increase the cost of credit for millions of American small business owners and hamper growth.

There are two issues related to the GSIB surcharge. The Fed has proposed a technical change to the short-term wholesale funding part of the calculation that will result in higher capital requirements for universal banks — those that lend to consumers and small businesses, and support the real economy — as compared to other GSIBs. The GSIB surcharges for the largest banks have also been driven higher over the last decade because of the growth of the economy, something that the regulators are only partly fixing. If the largest banks’ capital requirements rise because the economy grows, the cost of all lending at those banks rises.

On top of the GSIB impacts, small business loans could face capital increases under the Basel III proposal because of new requirements for operational risk. This addition can create duplicative capital requirements that could impact the cost and availability of small business lending. Capital requirements should reflect the actual risk of small business lending, instead of arbitrarily penalizing entrepreneurs.

For small businesses, the stakes are practical. Over-calibrated or unevenly applied capital requirements can increase the cost and reduce the availability of credit, making it harder for small businesses to manage day-to-day operations and invest in expansion. That's why final rules should be strong, durable, and risk sensitive — and why they should support responsible lending through the cycle.

Together, some of these proposed changes could increase the cost of providing the lines of credit that help businesses make payroll, manage seasonal fluctuations, purchase inventory, and invest for the future. Ultimately, when lending becomes more expensive for banks, credit can become more expensive or less available for the small businesses that drive local economies and job creation.

At JPMorganChase, we see firsthand how access to capital helps entrepreneurs start, grow, and scale their businesses. Through our American Dream Initiative, we're working to help more small businesses access the capital, coaching, tools, and practical policy solutions they need to thrive.

Our work with small businesses underscores the importance of a policy environment that supports entrepreneurship, investment, and growth. Capital requirements are one important piece of that equation.

Fixing the framework

A better framework should do three things:

First, the Fed should reconsider the proposed changes to the GSIB surcharge calculation, and, in particular, retain the current approach to the short-term wholesale funding factor that accounts for the size and funding diversification benefits of universal banks. Regulators should ensure the surcharge framework does not penalize the everyday lending and banking services relied on by small businesses.

Second, capital requirements should not increase just because the economy is growing or routine activity is expanding. The Fed has taken some steps to adjust the GSIB calculation to better account for historical and future economic growth, which we welcome. However, it has not fully adjusted for economic expansion since 2015 when the U.S. GSIB calculation was first finalized.

Third, policymakers should ensure the capital framework operates as a coherent whole, rather than layering multiple requirements on top of the same risks. When overlap occurs, it can drive up the cost of credit and other financial services without materially improving resilience.

We support timely finalization of durable rules. Well-calibrated capital rules can preserve the resilience of our financial system while supporting affordable credit and access to capital for small businesses and communities.

For small business owners, access to capital is what gives them the confidence to plan, the flexibility to manage through uncertainty, and the ability to invest in what comes next. Final rules should preserve a strong banking system while ensuring the capital framework supports growth, stability, and opportunity on Main Street.