U.S. banking regulators assured the Senate Banking Committee on Thursday that they have considered the concerns of community banks regarding Basel III capital rules and will ensure that such institutions are not harmed by the rules.
“We are the primary supervisor of the majority of community banks in this country, and we do not want to create a situation where the compliance costs make them uncompetitive or unable to serve their important roles in their local communities,” George French, the deputy director of risk management at the Federal Deposit Insurance Corp., said. “I think we are all in the position of looking at all of these [Basel III comment] letters and looking at all the individual issues that bankers have raised and deciding how to proceed.”
French said that while Basel III is intended to reduce risk to the U.S. financial system, “the goal should be achieved in a way that is responsive to the concerns expressed by community banks about the potential for unintended consequences.”
Community banks have expressed concern regarding the Basel III proposals and the compliance costs that would be associated with the rules. Community bankers have also noted concern regarding the rules’ statutes on “accumulated other comprehensive income” and the higher risk weights associated with various mortgage products.
“We will be mindful of these [concerns] when considering potential refinements to the proposal and will work appropriately to balance the benefits of a revised capital framework against its costs,” Michael Gibson, the director of banking supervision and regulation at the Federal Reserve, said. “As we work toward finalizing the rule, we will seek to further tailor the requirements as appropriate for community banking organizations.”
Tim Johnson, the chairman of the Senate Banking Committee, told regulators to use caution in designing and implementing capital reforms.
“I believe we share the same goal of strong and harmonized capital rules to promote financial stability, but before moving forward it is important to understand how the regulators have considered, and will continue to consider, the concerns being raised,” Johnson said. “I encourage your agencies to take the appropriate amount of time needed to get these rules right.”