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Tuesday, September 16, 2014

ABA, State Associations Pitch Relief for Highly Capitalized Banks

The federal banking agencies should allow highly capitalized banks to bypass the cumbersome calculations required by the Basel III capital standards, ABA and the state bankers associations said in a letter. The associations said:

This proposal is not intended to reduce the amount of regulatory capital banks need. It is designed to be a regulatory relief measure for banks that can demonstrate they have significantly more regulatory capital than the new Basel III standards require.

The associations proposed that banks with common equity Tier 1 risk-based capital ratios of at least 14% be allowed to use existing and less complex Basel I standards in calculating assets. A bank capitalized at the 14% level holds more than twice the Basel III requirement, making Basel III’s asset measurement requirements superfluous. The groups added:

For those banks, this considerable and costly work would yield no additional supervisory or safety and soundness benefits. Neither would it provide any service of any kind to any potential bank customer.

Read the letter.

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