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ICBA Supports FDIC Director’s Call for Regulators to Modify Basel III

September 17, 2012, 06:00 AM

The Independent Community Bankers of America (ICBA) today announced that it strongly supports Federal Deposit Insurance Corp. (FDIC) Director Thomas Hoenig’s call for regulators to modify proposed Basel III capital standards because of their complexity. Their one-size-fits-all approach is not appropriate for community banks. Community banks maintain the highest capital levels in the banking industry and should not be subject to the same complex capital standards as the largest and riskiest institutions.

“ICBA adamantly agrees with FDIC Director Hoenig that the Basel III capital standards are too complex and would impose undue regulatory burdens on community banks,” ICBA President and CEO Camden R. Fine said. “Applying these stringent and overly complex rules on community banks is illogical because they did not contribute to the financial crisis. ICBA strongly 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. ICBA is particularly concerned with the proposed new risk weights on mortgages and certain types of commercial loans. ICBA also recommends that community banks have the option to continue using Basel I risk weights.

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.

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