In a call to regulators to withdrawal Basel III capital proposals, the American Bankers Association sent Daniel Poston, the executive vice president and CFO of Fifth Third Bancorp, to testify on the rules’ potentially negative impact.
Poston said that regulators’ standardized approach to capital rules “should be withdrawn and an empirical study should be undertaken to better inform the development of an appropriate set of rules.”
“Rules with the power to create significant economic dislocations must be carefully considered and based on strong analytical research,” Poston said. “That was not the case in this rulemaking. In the desire to make changes, it should not be forgotten that the more complex the rules and the larger the change, the more likely they are to create unforeseen and detrimental consequences to our economy.”
Additionally, Poston said that while the industry supports rules requiring banks to have strong, high-quality capital, the proposed Basel III rules are overly complex and arbitrary.
“The issue here is not about higher levels of capital, as it is widely recognized that more capital would have made the financial problems for banks less severe in the last crisis,” Poston said. “Rather, it is the complex operation of the Basel III proposals, the volatility of capital measures and the arbitrary—and excessive—risk weights that will hurt banks, our customers and the U.S. economy overall.”
Poston also said that the proposals could negatively impact the mortgage market.
“The proposals related to mortgages would lead to a significant contraction in the mortgage market, completely upset home equity lending and further tighten and raise the costs of mortgage and home equity credit for borrowers,” Poston said. “Some proposals specifically target many safe and sound mortgage products and services for harsh capital treatment, driving up costs and compelling banks to reduce—or even stop—their involvement in mortgage lending.”