The Independent Community Bankers of America’s petition against the implementation of Basel III capital rules on community banks has gained the support of nearly 17,000 community bankers and their affiliates.
The petition to the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. notes that Basel III rules were designed to rein in the largest banks, adding that community banks had nothing to do with the financial crisis.
“The community banking industry has spoken—regulators’ approach to Basel III capital rules will have a negative impact on Main Street communities,” Camden R. Fine, the president and CEO of the ICBA, said. “These proposed capital standards were designed to reduce the risks posed by the large and complex financial institutions that contributed to the worst financial crisis since the Great Depression. Applying overly complex capital rules on community banks will fuel concentration in the banking industry, leaving small businesses and consumers with fewer banking options.”
The petition adds that the inclusion of accumulated and other comprehensive income as required capital would force community institutions to hold significantly more capital than required to comply with regulations.
The petition also warns that, because community banks and mutual savings institutions do not have access to capital markets, subjecting such institutions to fluctuating capital ratios based on the Federal Reserve’s interest rate policy is “an extreme disservice to them.”
“Basel III will force community banks to hire new compliance staff, compute complex risk weights for residential mortgages and limit their loan offerings to meet the requirements of arbitrary risk-weighted buckets—which will result in disastrous and unintended consequences to the communities they serve,” the petition said.