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Basel needs to reconsider global systemic bank proposal, ABA says

The American Bankers Association is recommending that the Basel Committee withdraw and reconsider a proposal that would determine if an institution should be regarded as a globally systemically important bank.

Hugh Carney, the ABA’s senior counsel, submitted comments on the Basel Committee on Banking Supervision’s July consultative document. Among several new requirements, the proposal would impose a capital surcharge on globally systemically important banks.

Carney wrote that the ABA supports ongoing regulatory reform efforts but has "fundamental reservations regarding…the underlying concept of a significant additional capital surcharge on globally systemically important banks.”

Carney’s comments also opposed the proposal’s design of the indicator-based methodology, which he wrote will reduce the ability of the banking industry to serve its customers.

The ABA is strongly recommending that the proposal be withdrawn and replaced with a proposal that contains a “transparent and empirically supported methodology; take into account the regulatory environment in which banks operate, including resolution regimes; (and) demonstrate the benefits exceed the costs (particularly the costs of reduced economic growth),” according to the ABA.

The Global Financial Markets Association also submitted comments to the consultative document that opposed the proposed surcharge and requested the proposal be “fundamentally revised and re-proposed,” according to SIFMA.org.

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