The Basel III global standard continued to draw criticism this week from industry trade groups, with both the Independent Community Bankers of America (ICBA) and American Bankers Association (ABA) registering strong comments with federal financial regulators.
The ICBA is specifically calling for the exemption of community banks from Basel III's proposed capital standards, noting that the rules should not apply to financial institutions with consolidated assets of $50 billion or less and that are not considered ‘systemically important financial institutions.’
‘Let us remember that community banks were not the cause of the financial crisis of 2008,’ the ICBA wrote in a comment letter to the Fed, OCC and FDIC. ‘Their simplified balance sheets, conservative lending practices and common-sense underwriting shielded their regulatory capital balances from the losses that heavily impacted the large, complex, internationally active and interconnected worldwide financial institutions.’
ICBA maintains that Basel III regulations would cause ‘a very large shift’ in community banks' definition of regulatory capital, minimum capital requirements and risk sensitivities and, in turn, ‘inflict irreversible damage on these institutions and the communities they serve.’
The ABA went a step further, suggesting that U.S. regulators withdraw from Basel III completely, saying the accord would make banks ‘less safe and slow down economic growth.’
‘Letters have poured in from lawmakers – both Democrats and Republicans – concerned about the impact Basel III will have on community banks, and every state banking regulator has joined in opposing this standardized approach,’ he noted.