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Senate Banking Committee’s Shelby voices concern about implementation of Basel III rules

Richard Shelby

Richard Shelby, the ranking member of the Senate Banking Committee, voiced concern in a Tuesday letter to banking regulators regarding their proposals to implement Basel III capital standards.

Shelby said that the proposals do not explain whether the Basel III rules “are appropriate for the U.S. banking system” or if the standards “will ensure that our banking system is sufficiently capitalized.”

Shelby also said that the proposals do not explain “with requisite specificity” the impact of the rules on the economy and the American banking system.

Shelby asked regulators to provide to Congress a cost-benefit analysis of the proposals.

“Although the agencies appear to have already conducted much of this analysis, they have so far chosen not to provide it to Congress or the public,” Shelby said in the letter to the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. “Additionally, the agencies contributed data from a domestic quantitative impact study…without publicly releasing specific U.S. findings. As a result, the agencies have now proposed new rules based in large part on a global QIS, utilizing non-public data and relying on non-public assumptions.”

Shelby said that he asked the Board of Governors in 2010 whether it would conduct a study that details how much capital will increase in the U.S. financial system as a result of Basel III rules, adding that Ben Bernanke, chairman of the FDIC, said the board had initiated a QIS.

“Nevertheless, the agencies have yet to provide this data to the Banking Committee or to the public,” Shelby said. “Such a cloistered approach to rule-making is inconsistent with our democratic form of government. By omitting key data from this important rule-making, the agencies are not only preventing the public from understanding how these rules will impact them and the economy, but also undermining the ability of Congress to hold the agencies accountable for the rules they promulgate.”

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