Capital Congressional Groundswell Rising Against “One Size Fits All” Basel Proposals A bipartisan groundswell of concern over the Basel III capital proposals continues to build throughout Congress, with many lawmakers in the House and Senate echoing particular points made in ICBA’s comment letter filed this week with federal regulators. Louisiana and Kansas delegations were the latest groups of lawmakers to jointly express concern over applying the complex capital requirements to community banks.
Louisiana’s entire congressional delegation signed onto a letter sent to regulators voicing support for a tiered approach exempting community banks from the Basel III proposals. “New capital rules should appropriately distinguish between the size, risk and complexity of the financial institution in order to develop a more level playing field,” the delegation wrote.
Kansas’s letter also voices similar concerns stating that the complexity of the proposals will impact the ability to meet customer credit needs in the communities they serve. “We fear that an increase in total capital requirements originally intended for larger, more complex financial institutions with international interests will result in less lending capacity for smaller institutions in communities across Kansas,” the letter points out.
ICBA is strongly requesting regulators to exempt community banks from both the Basel III and standardized approach proposals. As does ICBA’s comment letter, the Louisiana lawmakers note that the Basel proposals were originally intended to apply to the largest internationally active financial institutions, not domestic community banks. The lawmakers also agree with ICBA that, based on overwhelming feedback from their constituents, they believe the current Basel proposals’ would significantly harm not just community banks and thrifts but also local economies.
Republicans on the House Financial Services Committee, including Chairman Spencer Bachus (R-Ala.) and Rep. Jeb Hensarling (R-Texas), have also asked regulators to scrap Basel III’s current blanket approach to set more sensible standards for community banks. FDIC Director Thomas Hoenig, former FDIC chairman Sheila Bair and the Executive Council of State Community Bankers Association are among the growing regulatory voices who are highly critical of Basel III’s current approach.
Deposits WSJ: Corporate Treasurers Scrambling as TAG Renewal Deadline Nears Corporate treasurers are scrambling to reevaluate their cash deposit alternatives and policies, including how much money they should keep in any one institution, as the Dec. 31 expiration deadline on FDIC coverage of noninterest bearing accounts nears, the Wall Street Journal recently reported. Many of the cash policy reassessments involve risk-weighted reviews of the safety and credit ratings of the largest financial institutions. Confirming ICBA’s repeated arguments about the need for Congress to extend the TAG insurance program to maintain a level playing field for deposits between community banks and megabanks amid the ongoing economic fragility, the WSJ cited one corporate treasurer who admitted his company had few worries about leaving uninsured deposits in its Bank of America accounts. Several megabanks have hired consultants to assess and potentially capitalize on the shift in corporate cash reserves likely to take place if the full TAG insurance coverage expires.
ICBA continues working with lawmakers to procure an extension of this important deposit coverage. The association encourages community bankers to continue expressing their support for extending the program by urging their members of Congress to approve an extension. Write Congress Today.
Regulator Federal Reserve Board Small Debit Card Issuer Survey Reminder ICBA encourages community banks receiving the Federal Reserve Board’s survey of small debit card issuers to complete and submit the survey as soon as possible. The voluntary survey, sent to 1,000 community banks and credit unions with assets less than $10 billion and exempt from the debit interchange rate cap, inquires about the costs of implementing the network exclusivity provision of Regulation II (Debit Card Interchange Fees and Routing) and whether community bank cardholders have faced rejection or other discrimination when presenting their debit cards for payment. The deadline is Oct. 31, 2012.
Regulator Fed Changes Reserve Requirement Calculation for 2013 The Federal Reserve Board adjusted a calculation used to determine reserve requirements of depository institutions next year. For net transaction accounts in 2013, the first $12.4 million, up from $11.5 million in 2012, will be exempt from reserve requirements. A 3 percent reserve ratio will be assessed on net transaction accounts over $12.4 million up to, and including, $79.5 million, up from $71.0 million in 2012. A 10 percent reserve ratio will be assessed on net transaction accounts in excess of $79.5 million.
The adjustments are based on the industry’s growth in net transaction accounts and total “reservable” liabilities, respectively, at all depository institutions between June 2011 and June 2012. Read Fed Announcement.
In a related matter, the Fed also announced a five-month delay to simplify the administration of reserve requirements. In July, as part of the first phase of reserve requirement changes, the Fed discontinued as-of adjustments related to deposit report revisions and eliminated clearing balance requirements. The delayed second phase of reserve requirement changes will introduce a common two-week maintenance period and a penalty-free band around reserve balance requirements to eliminate carryover and routine penalty waivers. Those changes will take effect June 27.
Regulator Regulators Close Pa. Bank Regulators closed a bank Friday, bringing the total number of failures in 2012 to 47. NOVA Bank in Berwyn, Pa., was closed by the Pennsylvania Department of Banking, which appointed the FDIC as receiver. The FDIC said it estimates that the cost to the Deposit Insurance Fund will be $91.2 million.
Economy New-Home Sales Up 5.7 Percent New-home sales rose 5.7 percent in Sept. to a seasonally adjusted annual rate of 389,000, the Commerce Department and HUD reported. Sales were up 27.1 percent from a year ago. The seasonally adjusted estimate of new houses for sale at the end of Sept. was 145,000, representing a 4.5-month supply at the current sales rate.