WASHINGTON — Top banking House Republicans are urging banking regulators to withdraw their Basel III endgame proposal and to resubmit a revised rule, according to a letter obtained by American Banker. 

The letter, led by House Financial Services Committee Chairman Patrick McHenry, R-N.C., and Rep. Andy Barr, R-Ky., chairman of the subcommittee on financial institutions and monetary policy, is an escalation in longstanding Republican and industry pushback to the Basel rule. Increasingly, industry groups are looking to regulators to withdraw and restart the proposal, instead of just making tweaks to the final rule from the proposed version. 

The lawmakers' letter comes just ahead of Federal Reserve Chairman Jerome Powell's testimony in front of the full committee for his semiannual testimony on monetary policy. Powell, who's expected to hear criticisms about the proposal from Republicans — and even some narrower concerns from Democratic lawmakers — will also appear on Thursday before the Senate Banking Committee. 

Comment letters from the banking, energy and housing industry decried the rule — which would raise capital requirements considerably for the largest banks — on a number of grounds, including including what critics called the unsound methodology behind several assertions and regulators' failure to follow Administrative Procedure Act process requirements. Republican lawmakers have asked repeatedly about the justification for some of the proposal's toughest elements. 

"Those comments came from across the ideological spectrum and from a broad base of sectors," the lawmakers said in their Wednesday letter to the regulators. "This broad-based opposition makes clear that it is not just the banking industry crying wolf against heightened capital requirements." 

The lawmakers, in their letter to Powell, acting Comptroller of the Currency Michael Hsu and Federal Deposit Insurance Corp. Chairman Martin Gruenberg, asked that a new proposal include "rigorous quantitative analysis," which the lawmakers believe the original proposal lacks, and be introduced first as an advanced notice of proposed rulemaking, "and then proceed through the rulemaking process with transparency." 

Regulators, in October, extended the comment period on the proposal and asked for additional information from banks that is not shared through public filings or disclosures. 

"It is now unclear how the agencies will proceed or what the timeline may be for further development of the proposal," the lawmakers said in the letter. "To begin, there has been little clarity or transparency with Congress or the American people as to when or how the agencies will release the information collected from the banks or seek comment on whatever future analysis your agencies conduct using that information."

 The lawmakers also said that an attempt to "simply recalibrate the proposal," rather than substantially review public comments and start the rulemaking process over, would "open your agencies to criticism for rushing the process to avoid accountability under the Congressional Review Act." 

"Given the impact that the flawed proposal would have on the banking industry and the American economy, your agencies must provide greater clarity on what your plans are moving forward, and how you intend to take public comments into account," the lawmakers said. "We believe that the right path forward is to withdraw this flawed proposal and encourage you to do so." 

A Fed spokesperson said that the Fed has received the letter and plans to respond.