Basel III, Part 2

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:

  1. The earnings fluctuations that would result from including “unrealized securities gains and losses” in the calculation of regulatory capital;
  2. The extremely severe proposed risk weighting for “unconventional” residential mortgages; and
  3. 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 banksregs.comments@occ.treas.gov
    Office of the Comptroller of the Currency
    250 E Street SW
    Mail Stop 2-3
    Washington DC 20219

Federal Reserve banks – regs.comments@federalreserve.gov
    Jennifer J. Johnson, Secretary
    Board of Governors of the Federal Reserve System
    20th Street and Constitution Avenue NW
    Washington DC 20551

FDIC bankscomments@FDIC.gov
    Robert E. Feldman, Executive Secretary
    Attention: Comments/Legal ESS
    Federal Deposit Insurance Corporation
    550 17th Street NW
    Washington DC 20429

2 Responses to Basel III, Part 2

  1. Mike Cahill says:

    Joe, I continue to gain further appreciation for the IBA and the leadership you provide. Your efforts do not go unnoticed. I am sure you may not hear as much as you should, because most of the bankers in our state have become used to the job you and the IBA do for us. As a ‘late bloomer,’ I just want to let you know how crucial your job is, and how much it is appreciated.

    • Thank you for the kind words. It is always nice to be complimented. I love working on behalf of bankers and this important industry, as do all of the IBA staff. Bankers are the economic, civic and social leaders in every community. I am blessed to work with and for them, and further blessed with a deep, experienced and talented staff.

      Thanks for your industry leadership, and support of IBA and me!!!!

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