July 3 - The American Bankers Assocition has released the folowing statement by Frank Keating, ABA president and CEO, regarding the Federal Reserve's Basel III final rule:
“We appreciate regulators’ efforts to create a rule that focuses on adequate amounts of high-quality capital, which is really what Basel III is all about. While today’s rule brings us closer to achieving that goal, it’s clear that finalizing optimal capital rules for bank customers and our economy will require continued work from all stakeholders. We appreciate regulators’ willingness to listen to an unprecedented number of comment letters submitted by thousands of ABA member banks, all of our country’s state bankers associations and every state banking regulator. Those efforts clearly had an impact, and we’re hopeful this open line of communication will continue as the process moves forward.
“Basel III exists because Basel I and II didn’t get it right. For that reason, we shouldn’t expect this rule to be perfect either – it’s clear that more needs to be done. While each iteration brings us closer to optimal capital rules, we won’t know if we’ve achieved that goal without having a much more thorough understanding of Basel III’s real-world impact. The Federal Reserve has conducted ‘pro forma’ economic analysis, but the fragile nature of our economy demands better understanding.
“We strongly support legislation introduced in the House and Senate that would require a comprehensive economic analysis of the rule’s impact – particularly for community, mid-size and regional banks – before it goes into effect. Without such empirical data, we’ll continue to fly blind when it comes to understanding exactly how Basel III will affect banks and the broader economy.
“The real test for Basel III is whether the rule makes it easier or more difficult for banks to serve their customers. If it makes it harder, that’s not what our still-recovering economy needs. Regulators have done a great deal to address concerns raised during the comment period, including adding needed flexibility and making adjustments so that capital for some banks doesn’t magnify the ups and downs of the economy. Regulators have addressed a key issue that would have inhibited mortgage lending, but the treatment of mortgage servicing will drive a wedge between mortgage borrowers and lenders. More needs to be done to reduce Basel III’s complexity, allow adequate time to comply, and ensure the rule is less punitive for banks that are trying to make good loans to creditworthy business and personal borrowers.
“Today’s rule is the latest - but not the final - step in an ongoing process to find the optimal capital regime for the U.S. economy. During Basel III’s implementation period, the door is open for regulators to make the necessary adjustments to ensure the rule works for banks of all sizes and doesn’t impede economic growth.”