Regulators to tailor Basel III capital proposals to address community bank concerns

John Lyons

American regulators plan to tell critical lawmakers during a Wednesday hearing on the implementation of Basel III rules that capital rules will be shaped by the concerns of community bankers.

The Senate Banking Committee will question agency officials who are currently pushing for tighter capital rules designed by the Basel Committee on Banking Supervision. Testimony from the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency said that banking regulators want to make the capital transition as easy as possible for community financial institutions.

“As we work toward finalizing the rule, we will seek to further tailor the requirements as appropriate for community banks,” Michael S. Gibson, director of banking supervision and regulation at the Federal Reserve, said, according to Businessweek.

Community banks have voiced concerns regarding the implementation of Basel III rules, saying that they should not be subject to the same capital requirements of larger banks because their practices did not contribute to the recent financial crisis.

John Lyons, the senior deputy comptroller for bank supervision policy at the OCC, said that the agency will “carefully consider” such claims by community banks. Lyons added that the proposals already include “lengthy transition provisions and delayed effective dates” to help community institutions.

“The future safety and soundness of community banks will depend on their having sufficient capital going forward,” Lyons said, Businessweek reports. “We recognize that understanding and complying with the proposed rules could still be difficult for community banks. However, it is also important to recognize that the proposed rules are lengthy, in part, because they address banks of all shapes and sizes.”

Camden Fine, the president and CEO of the Independent Community Bankers of America, requested that community banks be exempt from Basel III requirements.

“ICBA seeks a full exemption for all banks with less than $50 billion in assets from all new capital rules under Basel III in order to avoid large-scale industry concentration that would curtail credit for consumers and business borrowers, especially in small communities,” Fine said in a Tuesday letter to the committee, according to Businessweek.

Thomas Curry, the comptroller of the currency, said in October that regulators are thinking about ways to reduce the compliance burden on community banks, adding that smaller banks may be subject to extended transition periods and grandfather clauses to help them comply.

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