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International Without Inter

By: Kari English

Last month the regulatory agencies proposed rules that would implement the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision. One of the rules would set a new minimum common equity Tier 1 ratio of 4.5 percent of risk-weighted assets and a common equity Tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets. It would also raise the minimum Tier 1 capital ratio from 4 percent to 6 percent of risk-weighted assets.

Because the Basel Committee on Banking Supervision is an international committee, its standards tend to be applied only to large, internationally active institutions. So the fact that the proposed changes would apply to all depository institutions, including bank holding companies with total consolidated assets of $500 million or more and savings and loan holding companies, came as a bit of a surprise when announced.

The Independent Community Bankers of America quickly responded.

“Basel III was originally conceived as an international standard that would apply only to the largest, internationally active banks,” said ICBA President and CEO Cam Fine. “ICBA is concerned that the proposal would subject Main Street community banks to the same regulatory standards as the larger and more complex financial firms.”

But the same day the ICBA expressed its concerns, FDIC Acting Chairman Martin Gruenberg said at the organization’s board meeting, “Our analysis suggests that most banks have ample capital to meet the proposed requirements. For example, we estimate that approximately 96 percent of all depository institutions currently hold capital that meets or exceeds the proposed requirements.”

Others disagree. The MarketWatch article, “Fed moves forward with Basel III capital rules,” states the largest 19 U.S. bank holding companies would have a capital shortfall of $50 billion if the capital buffer rules were effective immediately. The article goes on to say “other smaller and mid-sized banks would cumulatively need to raise roughly $10 billion in capital to meet the buffer requirements.”

Do you feel your bank could meet the proposed capital standards if they went into effect today? To learn more about the Basel III capital rules, go to and click on this column.

Basel III Capital Rules

Kari English is senior editor of BankNews.

Copyright (c) July 2012 by BankNews Media