Today, ABA, the Financial Services Roundtable and SIFMA submitted a detailed comment letter expressing serious concerns about the proposed Basel III capital rules. The banking industry strongly supports adequate, high-quality capital. Unfortunately, the proposed regulations go beyond that and would instead make banks less safe and slow down economic growth. Rather than being a buffer to economic turbulence, this plan would cause capital to amplify economic volatility, making it more difficult for banks to serve customers in hard times and more expensive in even the best economic conditions. Perhaps most troubling for bank customers, Basel III would punish institutions that make mortgage and small business lending a significant part of their operations. Putting a scarlet letter on these assets will only cause a retraction in financial activity when families, businesses and our economy can least afford it.
We need simpler rules that focus on good, quality capital at adequate levels, rather than a one-size-fits-all structure that is too complex and a bad fit for U.S. banks of all sizes. These very sentiments have been echoed by banks large and small that have filed their own comment letters explaining just how much this flawed proposal will limit their ability to serve their customers. 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, with the Conference of State Bank Supervisors filing objections to a proposal they believe ‘does not represent a thoughtful, long-term approach in the best interest of the U.S. banking system or the national economy.
We understand the difficulty banking regulators face as they try to translate this international capital regime into a workable program for the United States. We are confident regulators will seriously consider the many detailed comments provided not only by the three financial trade groups, but also by individual stock and mutual community banks, mid-size banks, regional banks and money center banks. In reevaluating the plan, the views of state bank regulators should be given equal weight to those of federal banking regulators. Congress should play a much larger consultative role in any proposal that would so profoundly alter the basic structure of America’s banking industry and its role in funding economic growth.
-- Frank Keating, ABA President and CEO
Read the comment letter.