Duke spoke about community bankers’ concerns regarding the Basel III proposals and noted the regulators have expressed their intentions to delay implementation deadlines of these proposals.
We heard many different concerns during our outreach efforts, but there were some recurring themes, including: the complexity of the proposed changes, the operational costs that would be incurred to track data that are not currently needed to calculate capital ratios, the potential impact on mortgage lending of the proposed mortgage risk weights, the accelerated phase-out of trust preferred securities from tier 1 capital, and the potential volatility in regulatory capital arising from the inclusion of unrealized gains and losses on available-for-sale securities.Duke also spoke about some data she has been studying regarding the effects of regulations as they relate to residential mortgage lending at community banks.
It's still far too early in the process to know where we and the other agencies are going to come out on these and other issues, or when final rules may be released. But what I can promise you is that before we issue final capital rules, we will do everything possible to address the concerns that have been expressed…
I am convinced that the best course for policymakers would be to abandon efforts for a one-size-fits-all approach to mortgage lending.Read Duke’s full remarks.
I think an argument can be made that it is appropriate to establish a separate, simpler regulatory structure to cover such lending.
Such a regime should still establish appropriate safeguards to protect consumers, but it should do so in a way that recognizes the characteristics of community bank lending, perhaps by focusing on appropriate disclosures and relying on regular on-site supervision to test for appropriate underwriting and loan structuring.