While the higher capital requirements contained in Basel III are entirely appropriate for internationally active financial institutions that may pose a systemic risk to our economy, the application of these requirements to community and regional banks raises serious concerns.They emphasized that higher capital requirements will force community and regional banks to hold resources internally instead of providing much-needed credit for small businesses and consumers in communities nationwide.
The impact of Basel III will be especially problematic for small rural areas served by community banks.They also noted that the U.S. financial system’s strength lies in its diverse mix of community, regional and multinational banks.
As we move forward, we need to ensure that rules and regulations are structured in a manner that promotes and strengthens this diversity rather than moving us to a system of fewer, larger institutions.The House panel leaders are part of a growing chorus of lawmakers who have expressed concerns about the Basel III proposals’ negative effect on community banks.
ABA continues to urge bankers who haven’t done so to write their regulators before Monday’s comment deadline about how the Basel III proposals would hurt their banks. Information to help craft individualized comment letters is available on ABA’s Basel III Web page.
Read the letter.