Frank Keating, the president and CEO of the American Bankers Association, recently expressed support for legislation that would require banking regulators to conduct a thorough cost-benefit analysis of the impact on Basel III rules on community banks.
Banking regulators, including the FDIC, Federal Reserve Board and OCC, have proposed capital rules related to Basel III rules developed by the Basel Committee on Banking Supervision. The rules would require banks to hold additional capital to protect against economic downturn.
Sens. Joe Machin (D-W. Va.) and Dean Heller (R-Nev.) recently introduce the legislation—S. 731—to require an empirical study on the impact of the proposals.
Keating said that while the rules were intended to increase capital levels for global banks, the rules proposed by America’s banking regulators “go far beyond Basel III framework.”
“They would impact banks of all sizes and business models and would have adverse consequences for the communities they serve and the overall U.S. economy,” Keating said. “The proposals are complex and would have a multitude of unintended consequences.”
Keating said regulators did not conduct an adequate cost-benefit analysis of the proposals, adding no empirical data was presented on the impact of the proposals on all segments of the U.S. financial system. He pointed to the legislation before Congress, saying the bill “corrects this flaw.”
“We appreciate your leadership on this issue,” Keating said. “We will encourage your colleagues to support S. 731 and similar measures that require a thorough analysis of the impact of Basel III on financial institutions.”