Capital Op-Ed Outlines Basel III Damage on Community Banks Proposed Basel III regulatory capital standards would negatively affect community banks by forcing them to invest in lower-yielding instruments, according to an American Banker op-ed. This will have a tremendous impact on future earnings and will restrict lending in the community, further hurting local economic conditions, the op-ed notes.
“Currently, a bank that is not well-capitalized cannot lend at a level necessary to improve earnings,” wrote Shea Dittrich, a risk-management software provider. “In order for the bank to expand, additional capital or an acquisition partner must be found. As a result of Basel III, the value of the bank will be reduced a great deal, as any capital invested is greatly affected by the new capital requirement.”
The federal banking agencies recently released a Basel III regulatory capital estimation tool that allows every community bank to estimate the impact of the proposed rules. ICBA is calling on community bankers to complete the calculator and write a comment letter by the Oct. 22 comment deadline describing how the Basel III proposal will affect their risk-based capital ratios.
Guidelines for drafting a comment letter, including a template and talking points, can be found on the ICBA website. ICBA also continues to call on community bankers to sign its petition calling on regulators to exempt community banks from the Basel III proposals.
Regulation OCC Outlines Small-Biz Investment Option The Office of the Comptroller of the Currency published a report on Small Business Investment Companies and the risk-management and regulatory implications banks should consider regarding these investments. The latest edition of the agency’s Community Developments Insights report describes how bankers can earn a return on their investments while potentially receiving positive Community Reinvestment Act consideration.
The program provides a way for banks to make capital available to small businesses that otherwise might not be able to finance their growth while introducing investing banks to prospective new clients.
Housing GSE Foreclosure Prevention Actions Top 275K This Year Fannie Mae and Freddie Mac completed more than 129,000 foreclosure-prevention actions in the second quarter of 2012, the Federal Housing Finance Agency reported. The FHFA said that the year-to-date total of foreclosure-prevention actions is now 275,100.
Nearly half of troubled borrowers who received loan modifications in the second quarter had their monthly payments reduced by more than 30 percent, the FHFA said. Approximately 29 percent of loan modifications completed in the second quarter included principal forbearance.
Additionally, foreclosure starts and foreclosure sales decreased in the second quarter. Real estate owned inventory declined for the seventh consecutive quarter as property dispositions continued to outpace acquisitions.
Total foreclosure-prevention actions are now at 2.4 million since the start of conservatorship in 2008, with 1.2 million of them permanent loan modifications.
Treasury Utah Bank Repays TARP Investment Treasury announced that Zions Bancorporation in Salt Lake City, Utah, repurchased its remaining $700 million in outstanding TARP preferred stock. Treasury originally invested $1.4 billion in the bank through the Capital Purchase Program. In addition to the $1.4 billion in repayments, Zions also paid $253 million in dividends over the life of its TARP investment.
With the repayment, the overall positive return on TARP’s bank programs now totals more than $21 billion, Treasury said. Treasury invested $245 billion through TARP’s bank programs and has recovered more than $266 billion through repayments, dividends, interest and other income.
Regulation Feds Reopen Swaps Comment Period Federal financial regulators reopened the comment period on a proposed rule to establish margin and capital requirements for swaps dealers. The comment period—which originally ended July 11, 2011—was reopened to Nov. 26. The move follows the release of a consultative document on margin requirements for certain derivatives recently published by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions.
Economy New-Home Sales Dip in August New-home sales declined 0.3 percent in August but remained near a two-year high, according to the Commerce Department. Sales were up 27.7 percent from a year ago. The median sales price of new homes sold in August was $256,900, and the average price was $295,300. The seasonally adjusted estimate of new houses for sale at the end of August was 141,000, a 4.5-month supply at the current sales rate.
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