George French, the FDIC’s deputy director of risk management supervision, told the committee:
We are the primary supervisor of the majority of community banks in this country and we do not want to create a situation where the compliance costs make them uncompetitive or unable to serve their important roles in their local communities.He emphasized that while the Basel III framework’s goal is to strengthen the long-term quality and quantity of the U.S. banking system’s capital base “the goal should be achieved in a way that is responsive to the concerns expressed by community banks about the potential for unintended consequences.”
I think we are all in the position of looking at all of these [Basel III comment] letters and looking at all the individual issues that bankers have raised and deciding how to proceed.
Michael Gibson, the Federal Reserve’s director of banking supervision and regulation, noted that community banks, among other things, are concerned about the Basel III proposals’ treatment of “accumulated other comprehensive income,” and also the relatively higher risk weights assigned to certain mortgage products.
Gibson told the committee:
We will be mindful of these [concerns] when considering potential refinements to the proposal and will work to appropriately balance the benefits of a revised capital framework against its costs. As we work toward finalizing the rule, we will seek to further tailor the requirements as appropriate for community banking organizations.Read the regulators’ testimony.