Pub. 7 2010-2013 Issue 3

September/October 2012 11 Extraordinary Service for Extraordinary Members. B EYOND WASHINGTON, OUR IN- dustry is also confronting a huge challenge originating from a city located where the Swiss, German, and French borders meet—Basel, Switzerland. That’s the origin of “Basel III,” the new interna- tional regime for bank capital, which the Federal Reserve, FDIC, and OCC released in three joint proposals on June 12. Among other things, the proposals would raise minimum capital require- ments, narrow the definition of capital, and increase the risk-weights for vari- ous asset classes. The original dead- line for comments was Sept. 7. That deadline, however, has been extended until Oct. 22, thanks to ABA, state associations, grassroots bankers, and members of Congress, who urgently requested the agencies to providemore time to analyze and comment on the complex proposals that are more than 1,000 pages in length. The complexity of the rules is just one concern among many that we’ve identified with the help of our staff of experts and more than 200-plus bank- ers who are participating in our Basel III working groups. Another issue is the depressing effect of the propos- als on fragile mortgage and housing markets, since banks would have to set aside more money to stay in the mortgage business. The Basel III proposals also dis- count the depth and diversity of the American banking system. There are more than 7,000 banks of all sizes and business models and that’s too much for a “one size fits all” approach that affords little room for adjustment. As we continue to point out, successful financial regulation should apply basic standards to all firms in a way that rec- ognizes and accommodates differences between small banks, large banks, and many in between. Capital is a simple concept, and for generations it’s been relatively simple to calculate. Under Basel III, compli- cated capital formulas and rules must be applied. We think this complexity will make capital too opaque for inves- tors to understand. And it is investors who are the key source of funds for bank capital. Given greater uncer- tainty about how much money they must put at risk for a bank’s business plan, investors will look elsewhere. They’re just not going to invest in what they don’t understand. I’ve described some of our con- cerns, and we’ll be highlighting these and more in our comment letters to the agencies. You need to do the same. The regulators need to hear from you about how the Basel III pro- posals would affect your bank, your business model, and your customers and communities. Those new capital regulations may havebeendrawnup inBasel, but theyare going to come down on every hometown bank inAmerica. That’swhyABAhas es- tablished a Basel III resources section at www.aba.com/Issues/Pages/Basel_III. aspx that provides issues to consider, summaries, and tips for drafting and submitting your comment letters. Tell the regulators your storyabout howthese proposals—developedaworldaway—are going to affect your bank, your custom- ers, and your community.  Washington Update I frequently write about the challenges to the banking industry posed by lawmakers and regulators inWashington. After all, their actions and decisions are very much a part of your bank’s operations. The ongoing implementation of the Dodd-Frank Act is taking up more and more of your time and your bank’s resources. Capital Comments Needed Frank Keating , President & CEO, American Bankers Association Reach Frank Keating by email at fkeating@aba.com.