-
A proposal by regulators to revamp the way banks must measure risk on certain assets is alarming many community bankers, who argue it will raise capital requirements, increase compliance costs and curb lending.
June 14 -
The Fed on Thursday issued proposals that would raise banks' minimum capital requirement to 7%.
June 7
WASHINGTON — Federal regulators handed community banks a small but crucial victory on Wednesday, giving them more time to voice growing concerns over a set of proposals that would enact Basel III capital and liquidity requirements for all institutions.
The banking agencies said they would provide an additional 45 days of public comment on their June proposal, with a new deadline of Oct. 22.
The extra time may prove critical for small banks, who are amassing support among Congress and elsewhere to try and soften the proposal and lessen its impact on community institutions.
"Basel III was never intended to apply to community banks, and in our view should not be imposed upon them," said Cam Fine, president of the Independent Community Bankers of America.
Bankers will now have the time "to document and demonstrate their very real and deep concerns with applying Basel III capital regulations on thousands of local banks that serve the nation's small businesses and consumers on Main Streets across America."
Regulators said they offered the extension to "allow interested persons more time to understand, evaluate, and prepare comments on the proposal," which would revise and replace current capital rules, as well as establish a leverage ratio and countercyclical buffer.
The proposal released by U.S. regulators effectively adopts international capital standards set by the Basel Committee on Banking Supervision, which are designed to prevent a repeat of the financial crisis.
For the most part, small banks had expected the majority of the Basel III plan, which dictates the quality and quantity of capital institutions must hold, to apply to them, including a requirement that they hold 7% in common Tier 1 capital.
But the proposal upped the ante for the roughly 7,000 smaller-sized institutions by changing the risk-weighting calculation for certain assets, including U.S. government securities, corporate exposures and residential mortgages. Community banks had expected to be allowed to stay with an earlier edition of the Basel accord, which was initially adopted in the late 1980s.
Since the proposal was released, concerns among institutions have risen to near a boiling point, with bankers expressing outrage to regulators during in-person meetings and conference calls.
Joe Goyne, chairman and president of Pegasus Bank in Dallas, recently attended a meeting with officials from the Federal Deposit Insurance Corp. on the proposals, which he said was contentious.
"If you could have seen some of the bank presidents at this meeting, I thought some of them were going to literally explode," Goyne said of the Dallas meeting.
Those bankers are hardly unique. Dick Evans, chairman and chief executive of $21 billion-asset Cullen/Frost Bankers in San Antonio, Texas, called the proposal "insane" on a recent earnings conference call with analysts.
