Wall Street groups warn Basel rules could hurt Treasury market liquidity

Treasury market liquidity is the real pressure point in Wall Street’s fight over Basel Endgame, because tighter capital charges do not just sit on a compliance spreadsheet. They change how much balance sheet Goldman Sachs and its peers can deploy, how much inventory they can carry, and how easily trading desks can absorb client flows in rates, repo and other financing markets.

On June 18, three of the biggest industry groups, the Institute of International Finance, the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association, asked the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to rework the proposals so they better matched risk and did not unintentionally impair Treasury-market functioning. The groups are arguing that if capital is tied up in the wrong places, market makers will become more expensive to run and less willing to intermediate stress, which can show up quickly in client execution and financing costs.

That matters at Goldman because financing is not a side business. In its 2025 annual report, Goldman said financing businesses accounted for 37% of total FICC and Equities net revenues in 2025, up at a 17% compound annual growth rate since 2021. The firm also reported 2025 net revenues of $58.3 billion and earnings per share of $51.32. Goldman says it makes markets and facilitates client transactions in fixed income, currency, commodity and equity products on a global basis, so any rule that makes balance sheet scarcer can feed directly into pricing, inventory management and the capacity to serve clients.

Regulators have framed the March 19 capital package as a modernization meant to align capital more closely with risk while preserving safety and soundness. The Federal Reserve said overall banking-system capital would modestly decrease under the proposals, but would still remain substantially higher than before the financial crisis. Banks counter that the calibration still matters, especially after the 2019 repo stress, when secured and unsecured funding rates spiked and the effective federal funds rate briefly moved above the FOMC target range. That episode is one reason Treasury-market fragility remains a live issue for dealers, not an abstract policy debate.

For Goldman employees, the stakes are operational as much as regulatory. More restrictive capital treatment can make rates and repo desks less flexible, narrow the inventory they can hold for clients, and raise the price of stepping into volatile flows. A revised framework could ease some of that pressure, which would matter for revenue generation in markets and financing at a time when management is still trying to balance growth, risk and balance-sheet allocation across the firm.