Proposal to Simplify Capital Rules Doesn’t Go Far Enough for Community Banks
Washington, D.C. – The Conference of State Bank Supervisors (CSBS) appreciates the federal government’s recent effort to simplify regulatory capital rules, but the proposed changes do not go far enough to relieve what has been an unnecessary burden on community banks.
“State regulators support simplification, but only if it’s real and meaningful,” said John Ryan, CSBS president and CEO. “In the past couple years, community banks have adjusted their systems to conform to the current methodology, and small changes will result in additional costs for these banks to tweak their core systems without any perceivable benefit.”
Ryan added: “Federal regulators need to keep in mind that a community bank is often the only local source of credit and banking services in hundreds of U.S. counties. And regulatory compliance has a disproportionate impact on their cost structure.”
In a comment letter sent Dec. 26 to the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency, CSBS asked for more substantial changes to the rules that would result in a simpler method for calculating risk-weighted assets for community banks.
At issue is the significant burden on community banks posed by sweeping banking reforms, specifically Basel III, a global framework regulating bank adequacy that in 2013 created a standardized methodology for all banks, including community banks.
State bank regulators support the risk-based framework, but the standardized approach, which applies to banks of all sizes, has significantly increased compliance costs for community banks. For example, the adoption of Basel III added the number of risk weighted assets for banks from 11 to 16 and the instructions from 32 pages to 102 pages.
CSBS has long championed a common definition for community banks – building on the FDIC’s existing research definition – that would allow regulators to exempt smaller institutions that do not pose system risk from rules and regulations aimed at larger, more complex financial institutions.
The CSBS comment letter is available here.
Media Contact: Susanna Barnett, 202-407-7156, firstname.lastname@example.org
The Conference of State Bank Supervisors (CSBS) is the national organization of bank regulators from all 50 states, American Samoa, District of Columbia, Guam, Puerto Rico and U.S. Virgin Islands. State regulators supervise roughly three-quarters of all U.S. banks and a variety of non-depository financial services. CSBS, on behalf of state regulators, also operates the Nationwide Multistate Licensing System to license and register non-depository financial service providers in the mortgage, money services businesses, consumer finance and debt industries.