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Tuesday, April 11, 2017

ABA Urges Treasury, Regulators to Fix Capital Rule Problems

As part of the banking industry’s continuing response to President Trump’s executive order outlining “core principles” for financial regulation, ABA has provided recommendations to the Treasury Department on areas where the bank capital framework can be improved.

Specifically, ABA recommended ending the penalty on banks for holding mortgage servicing assets, treating risk-free assets like cash and reserves at the Fed as truly risk-free, correcting the Basel capital disadvantage for Subchapter S banks, excluding unrealized gains and losses from capital calculations, following congressional intent on trust preferred securities and reducing unnecessary complexity in capital calculations.

ABA emphasized that holding adequate levels of capital is a “primordial view” of the bankers. Today, “capital regulation for U.S. banks is far more complex than need be to achieve that supervisory result,” the association added. “There is some tailoring of capital standards, but more can be done to make capital regulations better aligned with the risks presented by the variety of business models and activities of our diverse banking industry.”

As Treasury reviews the capital framework, ABA urged policymakers to focus on unique concerns related to community banks, reducing the number and complexity of calculations, recognizing the role of stress testing and incorporating appropriate risk sensitivity instead of relying solely on a leverage ratio.

The white paper is the second of several that ABA will submit to Treasury in response to the executive order. It reflects feedback and input from numerous banks participating in ABA’s capital working groups over recent years.

Read the white paper.

1 comment:

Clair Leitney said...

Why does the Federal Government need to be involved in this level of individual financial decision making? Is Big Brother supposed to beat up the kid who stole our Halloween candy?

If the obligation of Personal Responsibility is to remain an essential amendment to our collective make-up, then the consequences for those who do not practice it, especially with their own money and future, need remain. If there is no consequence to its lacking, gone is the incentive to cherish its importance.

Here's a thought - study investment opportunities on your own and take any and all advice with extreme caution. If Bernie Madoff convinced me to buy stock in the Brooklyn Bridge, yes, shame on him, but of equal importance, shame on me.

Any investment firm or broker who doesn't have their client's best interests in mind, will not stay in business for long, as their interests are one in the same - to make money. If the client gets rich, so does the broker. If this is too broad of a generalization, and there are some exceptions to this rule, the solution is a simple, state-based one: If enough states have laws that emphasize clients' interests first, the same result is accomplished as a Federal Law, without giving more power to Centralized Government, as there are less states in which the firm can consult, thus, forcing the firm to adhere.

By all means, as dissertation writers claim, Power to the People through Governors and State Legislatures. No need for the Federal Government to do what can easily be accomplished on a state level.

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