* Bipartisan group of 53 senators asks regulators to
* Group concerned about impact on community banks
By Emily Stephenson
Sept 27 U.S. bank regulators should weigh
whether proposed rules requiring financial institutions to hold
more capital would unfairly boost compliance costs for community
banks and stifle lending, a bipartisan group of 53 senators said
The group supports efforts to boost capital requirements as
a means to strengthen banks, the senators said in a letter to
Federal Reserve Chairman Ben Bernanke, Comptroller of the
Currency Thomas Curry and Federal Deposit Insurance Corp Acting
Chairman Martin Gruenberg.
But they asked the regulators to take another look at the
impact of the rules, which would implement an international
agreement on bank capital standards known as Basel III, for
"A strong and viable capital base is vital to ensure
financial institutions are able to absorb unexpected loss," the
senators said in the letter.
"However, the complexity of new global rules adds little
value to the community institutions which your agencies
rigorously regulate and monitor," it said.
The Basel agreement is part of international regulators'
efforts in the aftermath of the 2007-2009 financial crisis to
make sure the global banking system is more resilient. U.S.
banking regulators have issued a proposal on how to implement
the rules in the United States.
The plan would require banks and other financial
institutions to hold amounts of reserve capital that would be
calculated based on the riskiness of the assets they hold.
The U.S. rules, which have not been finalized, would be
phased in over six years starting in January and would force
banks to hold about three times as much basic capital as the
last international accord required. The biggest banks would hold
Community banks, who initially hoped to escape the brunt of
the new standards, say the plan is too complicated and would
boost compliance costs. That could limit community banks'
ability to lend to small businesses and throw up another barrier
to the fledgling economic recovery, banking groups argue.
Thomas Hoenig, a former president of the Federal Reserve
Bank of Kansas City and current member of the FDIC board of
directors, said earlier this month that regulators should scrap
Basel III altogether and draft a simpler proposal.
The bipartisan group, led by Senators Pat Toomey, a
Republican from Pennsylvania, and Mark Warner, a Democrat
representing Virginia, asked regulators to consider potential
unintended consequences for community institutions as they
finalize capital rules.
"Smaller financial institutions offer unique services to
their communities with much less institutional complexity,"
Warner said in a statement. "As regulators implement Basel III,
we hope they will acknowledge these inherent differences."
A spokeswoman for the Federal Reserve said all comments on
the proposed capital requirements would be considered before
finalizing the rules.
Spokesmen for the FDIC and the OCC said the agencies would
respond directly to the lawmakers.
The three agencies have extended the comment period until
Oct. 22 to give industry more time to weigh in on the new rules.