The Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency issued a joint statement last Wednesday, announcing that they were extending the comment period regarding capital issues resulting from their proposed adoption of the Basel III international bank capital standards. The comment period originally was set to expire on Sept. 7, but now has been deferred until Oct. 22. This extension is the direct result of strong grassroots efforts by bankers.
It is an appropriate and necessary result, due to the complexities of the new standards as evidenced by the 800+ page rule. While we collectively celebrate this extension and thank the regulators for providing it, we still have little time to respond to the core issues that must be remedied in order for community bankers to continue to provide financial services in their communities.
In the coming days and weeks, bankers and community groups will be asked to provide specific suggestions on areas that require attention of the regulators. While I am certain there will be many more, below are just a few:
- The earnings fluctuations that would result from including “unrealized securities gains and losses” in the calculation of regulatory capital;
- The extremely severe proposed risk weighting for “unconventional” residential mortgages; and
- Measuring the impact of proposed “capital buffers” on top of new risk-weighted capital ratios.
While I have only scratched the surface of the issues, I hope bankers all understand that, in the next two months, their very survival could rest upon the final draft of these capital standards. Consequently every bank will need to designate someone to send in comments as to how the bank and its community will be impacted by the resulting rule. Please be attentive to pleas from IBA, ICBA and ABA to provide comments.
IBA will fight for an exemption for community banks, just as those exemptions occurred in Basel I and II. After all, Basel III pertains to an international standard, and few community banks participate in international transactions.
Please help us help you by sending comments to your primary regulator:
OCC banks – email@example.com
Office of the Comptroller of the Currency
250 E Street SW
Mail Stop 2-3
Washington DC 20219
Federal Reserve banks – firstname.lastname@example.org
Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington DC 20551
FDIC banks – comments@FDIC.gov
Robert E. Feldman, Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street NW
Washington DC 20429