Washington, D.C. (PRWEB) November 29, 2012
The Independent Community Bankers of America (ICBA) today detailed in congressional testimony why policymakers should exempt the nations community banks from proposed Basel III regulatory capital standards. Testifying ahead of the House Financial Services Subcommittees on Insurance, Housing and Neighborhood Chance and on Monetary Institutions and Consumer Credit, ICBA Chairman-Elect William A. Loving Jr. stated that the guidelines need to not apply to U.S. monetary institutions with consolidated assets of $ 50 billion or significantly less.

Basel III was meant to apply only to the very largest, internationally active institutions, said Loving, who is also president and CEO of Pendleton Community Bank in Franklin, W.Va. Neighborhood banks, with their basic capital structures and transparent and conservative lending, have little in frequent with these larger institutions. Applying the exact same capital guidelines, in addition to the numerous other new and far-reaching regulations that are quickly becoming effective, will only undermine the viability of thousands of community banks.

Loving said that applying Basel III and the standardized method to neighborhood banks would lead to additional industry consolidation. By penalizing relationship-based lending without regard to asset quality, the guidelines would leave shoppers with fewer possibilities and significantly less access to credit. Further, he stated, imposing complex and excessive capital requirements is not viable for neighborhood banks because they have very limited alternatives for raising new capital, as opposed to their larger competitors. Mutual banks and other thrifts will be disproportionately affected, Loving noted, since they hold a lot more mortgages loans than other community banks.

Loving cited an ICBA Basel III petition signed by practically 15,000 folks. The petition notes that neighborhood banks maintain the highest capital levels in the banking sector and did not engage in the reckless behavior that contributed to the current economic crisis. Basel III will only limit the capability of community banks to lend and invest in their communities and threaten the nations economic recovery, the petition states.

If policymakers do not exempt neighborhood banks from the Basel III suggestions, Loving stated, they need to significantly simplify the rule and much better align the proposed capital requirements to the distinctive strengths and activities of neighborhood banks. Amongst its modifications, ICBA is calling for regulators to:

completely exempt banks beneath $ 50 billion in assets from the standardized method for threat-weighted assets,
lessen the proposed substantially larger danger weights for balloon mortgages and second mortgages to their current Basel I levels,
exclude modifications in unrealized gains and losses in investment portfolios (accumulated other extensive income) from the calculation of regulatory capital for banks under $ 50 billion in assets to keep away from harmful and unnecessary volatility in capital adequacy,
continue the current Tier 1 regulatory capital remedy of trust-preferred securities issued by bank holding businesses with consolidated assets between $ 500 million and $ 15 billion to reflect congressional intent,
exempt all thrift holding organizations with assets of $ 500 million or significantly less from Basel III and the standardized approach (just as bank holding businesses are) or give a policy rationale for why they are not exempt, and
apply Basel III and the standardized strategy to credit unions if the rules will apply to neighborhood banks.
To read Lovings testimony and for a lot more information, visit http://www.icba.org/advocacy.

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