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ICBA Raises Basel III Concerns in Meeting with Fed

July 16, 2012, 07:17 AM
Filed Under: Banking News

The Independent Community Bankers of America (ICBA) expressed strong concerns with proposed rules to implement Basel III capital standards in a meeting with Federal Reserve officials. In a meeting this week with Federal Reserve Governor Elizabeth Duke and other senior officials, ICBA community bankers and staff said that proposed risk weights would impose excessive burdens on community banks.

“Community banks are common-sense institutions that maintain the highest capital levels in the banking industry—they should not be subject to the same complex standards required of larger and riskier financial firms,” said ICBA Chairman-Elect Bill A. Loving Jr., president and CEO of Pendleton Community Bank in Franklin, W.Va. “The federal banking regulators’ proposed rules to implement Basel III capital standards would impose undue regulatory burdens on community banks. ICBA supports a tiered approach that properly recognizes the difference between Main Street community banks and Wall Street megabanks.”

Basel III was conceived as an international standard that would apply only to the largest, internationally active banks. However, the proposed rule issued by federal regulators would impose Basel III standards on banks of all sizes—not just on the large and complex financial institutions that caused the recent Wall Street financial crisis. Community banks did not engage in the reckless behavior that contributed to the crisis and subsequent economic downturn. Imposing excessive regulatory standards on community banks would only threaten the nation’s economic recovery.

In its meeting with Federal Reserve officials, ICBA expressed strong concerns about the proposed new risk weights, particularly on mortgages, certain types of commercial loans, and nonperforming loans. ICBA recommended that community banks have the option to continue using Basel I risk weights. The association also said accumulated other comprehensive income, or AOCI, should not be included in regulatory capital; trust preferred securities previously issued by institutions with less than $15 billion in assets should be grandfathered and not phased out; and mortgage-servicing rights should continue to be included as Tier 1 capital. Also, the current cap on the inclusion of allowance for loan and lease losses, or ALLL, as capital should be raised. ICBA will continue working with regulators on these issues. For more information, visit

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