Oklahoma legislators worry about Basel III proposals’ impact on small banks

Members of Oklahoma’s congressional delegation, in a letter sent last week to federal banking regulators, expressed concern about Basel III proposals that they contend will hurt banks.

“[M]any small banks in Oklahoma are at risk of closing or being consolidated because the excessive cost of regulations has made it too difficult for them to stay in business,” the letter said.

The delegation warned that the proposal was developed for large global banks but would be imposed on institutions of all sizes, including rural banks in their home states.

[The] change in the definition of capital and the increase in the risk weights of many asset classes will squeeze banks even as their broader regulatory burdens are increasing,” the letter said. “Many banks will simply stop making loans in certain lending areas because of the new risk-weighting requirements being imposed by your regulations. This is to the detriment of Oklahoma banks and the communities they serve.”

The legislators raised several questions about the proposals, including how their impact was measured on small banks, why they were being assessed on small institutions in the same way as large ones and if the Federal Reserve intends to exempt banks from the proposals.

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