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Regulators are expected to miss a global deadline to finalize Basel III capital and liquidity requirements by yearend.
November 6 -
While ICBA supports further study, we hope Congress will come to the conclusion that it should never have been proposed for financial institutions that have no international exposures or are not of a certain size.
November 2 -
Subordinated debt could be an option for community banks that need to raise capital but want to avoid dilute existing shareholders. Still, naysayers point out that many community banks prefer the simplicity and liquidity that comes from equity.
November 1 -
In detailed comment letters, banks expressed despair over the hardships they will face if regulators implement Basel III capital and liquidity rules.
October 22 -
The Fed on Thursday issued proposals that would raise banks' minimum capital requirement to 7%.
June 7
WASHINGTON – Senators anxious that a package of capital and liquidity rules could wreak havoc on community banks are set to meet next week to examine the plan by regulators.
Senate Banking Committee Chairman Tim Johnson, D-S.D., announced Wednesday that the panel will hold an oversight hearing on Nov. 14 focusing on a June plan released by the three banking regulators – the Federal Reserve Board, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency — to adopt Basel III in the United States.
Michael Gibson, director of banking supervision and regulation for the Fed, John Lyons, chief national bank examiner for the OCC, and George French, deputy director of risk management supervision for the FDIC, are expected to testify.
This is the first hearing held by the committee on the package of rules, which are designed to improve the quality and quantity of capital that banks of all sizes must hold to prevent a repeat of the financial crisis.
Community banks have led a revolt against the proposals, arguing it could put them out of business.
“There are a lot of levels of anxiety on the Hill,” said Wayne Abernathy, executive vice president of financial institutions policy and regulatory affairs for the American Bankers Association. “They’ve heard from enough folks back home that it has credibility with them. It’s not just the one or two bankers that are frequent commenters, they’re hearing it from a lot of bankers in their states back home and they are hearing a consistent message.”
More than 1,000 comment letters have been filed by financial institutions large and small raising issues with the plan. Community banks were encouraged by the Independent Community Bankers of America and other trade groups to write personal letters detailing how the set of rules would impact their individual institutions. Several lawmakers also weighed in, including one letter signed by 53 senators from both political parties.
While the election may have kept many members away from their offices in Washington and served as a distraction, observers said lawmakers are likely to become increasingly interested on the package of rules, which are supposed to be finalized by yearend.
“I think that legislators will want to be more involved, because I think they are realizing this is a very big deal,” said Abernathy. “Legislators think they’ve been given the task to set up policy, and to see a significant policy like this that they’re not somehow or another clued in with or have a hand in isn’t going to feel right to them.”
State regulators have also objected to the proposals, with the Conference of State Bank Supervisors warning that the package of rules has significant issues that need to be addressed.
Observers said it’s unusual for such a rule to attract this much political attention during an election year, but said its potential impact on the economy raised its profile.
“This was an election about the economy and jobs, and this is a rule that is about the economy and jobs,” said Michael Stevens, senior executive vice president of CSBS. “To the extent that it has an impact on the bank’s ability to lend and the way they lend has a direct economic impact that is felt at a local level. If the Hill is expressing their concerns, you have to think it’s coming from their constituents that operate at a very local level that extend credit to individuals and small business. This is about economic growth and jobs.”
Regulators in June released three regulations, the first of which was a proposal to establish minimum capital requirements, a leverage ratio, and a countercyclical buffer. A second proposal would revamp the way banks must measure risk on certain assets in order to be more risk-sensitive. They also approved a final rule that would reduce banks’ reliance on credit ratings in capital requirements.
Small banks had largely anticipated the majority of the Basel III plan, but were caught off guard by changes that dictate how much risk-based capital banks must hold against certain assets, such as foreign government securities, corporate exposures and residential exposures. Large banks share similar concerns on that part of regulators’ plan.
