Banks are stepping up opposition to looming capital standards, with one of the financial industry's largest lobbying groups warning that regulators risk slowing the global economy with a clampdown on lenders' ability to judge the health of their own borrowers.

The Basel Committee on Banking Supervision's proposed curbs on banks' use of internal models to assess risks would have a "material impact" on lending to financial institutions, corporations, and other borrowers, the Institute of International Finance (IIF) wrote in an 83-page letter to the regulator. The IIF called on the Basel Committee, whose members include the U.S. Federal Reserve and the European Central Bank, to grant banks more leeway in assessing the riskiness of borrowers, particularly large corporations.

"In the post-crisis period, when many economic sectors in both developed and emerging markets still highly rely on banks as the main source of funding, reducing the alignment of capital and risk could negatively and unnecessarily affect the availability and pricing of credit to the economy," according to the IIF's letter, dated June 3 and released on Monday. The group represents about 500 firms, including JPMorgan Chase & Co., Deutsche Bank AG, and BlackRock Inc.