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Arkansas delegation warns of Basel III’s effects on community banks

Mark Pryor

Arkansas’ congressional delegations recently called on federal banking regulations to take into consideration the unintended consequences of proposed Basel III capital standards on the state’s community banks.

In a letter, the lawmakers warned that new Basel III requirements “will narrow the types of capital banks can have while establishing higher capital ratios and risk weights for assets.”

“Banks in Arkansas – indeed, across rural America – will be unable to deploy capital throughout their communities,” the letter warns. “As a result, qualified families will struggle to gain financing for their first homes and small businesses will have trouble getting much-needed lines of credit.”

The lawmakers said that they are aware of the interconnectedness of global financial systems and the need for rules governing it, but said that the federal government must strike an appropriate balance in meeting its objectives.

“Asking banks in rural Arkansas to comply with standards intended for large institutions fails to achieve that balance,” the letter said. “We understand and share your desire to strengthen our financial system. However, we ask that you carefully consider the unintended consequences of the proposed regulations on community banks.

The letter was signed by Sens. Mark Pryor (D) and John Boozman (R), as well as Congressmen Steve Womack (R), Rick Crawford (R), Tim Griffin (R) and Mike Ross (D).

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