The Basel III bank capital requirements proposed earlier this month threaten to eviscerate the supply of eligible investments for tax-free money market funds — an industry already struggling with a severe supply shortage. Bankers and analysts have argued that the proposed capital requirements would make it more expensive for banks to guarantee municipal debt. In a research report this week, Chris Mauro, head of municipal strategy at RBC Capital Markets, estimated the requirements, if phased in, would add 100 basis points to banks’ cost of writing letters of credit and standby bond purchase agreements guaranteeing floating-rate debt issued by triple-A rated municipal governments — and presumably more for lower-rated governments.