Fed extends comment period on Basel III NPRs

Sherrod Brownd

The Federal Reserve announced on Wednesday that it would extend the comment period on three notices of proposed rule-making that would revamp the current capital rules under international Basel III requirements.

The rules were published by the central bank in June, and the Fed said that it had extended the deadline, previously set at Oct. 22, to Sept. 7. The proposal would force banks to rely largely on equity rather than debt to buffer against significant financial losses, Reuters reports.

“The comment period was extended to allow interested persons more time to understand, evaluate and prepare comments on the proposals,” the Fed said, according to Reuters.

Participants in the banking industry have pressured regulators to ease up on the requirements, though the proposal largely rejects those petitions. The Fed’s announcement came just one day after several state banking groups requested an extension.

Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.), however, urged the Fed to impose even tougher requirements on America’s largest financial institutions.

“The surcharge on the mega banks should be high enough that it will either incent them to become smaller or help to ensure they can weather the next crisis without another taxpayer bailout,” Brown and Vitter wrote in a letter to Ben Bernanke, the chairman of the Fed, Reuters reports.

Basel III is an international accord signed by regulators around the world that seeks to toughen up the global banking system. The agreement, which will be phased in between 2013 and 2019, will require banks to maintain capital levels equivalent to seven percent of their risk-bearing assets. Some 28 worldwide “systemic” banks, however, may be required to hold an additional 2.5 percent in capital.

One Response to Fed extends comment period on Basel III NPRs

  1. Per Kurowski says:

    When bank regulations allow banks to hold less capital lending to those perceived as not risky, they discriminate against those perceived as “risky”, like small businesses and entrepreneurs, and that is just dumb.

    Not only have those perceived as “risky” never ever set off a major bank crisis, but also it is precisely the somewhat risky risk-takers we most need to get going when times are tuff.

    Sincerely the risk-aversion introduced by bank regulators is something that should be closely screened by Homeland Security.