Community Bankers of Iowa Monthly Banker Update August 2013 | Page 7
Written By: James Kendrick, Vice President, Accounting and Capital Policy for ICBA
Washington Watch: Leveraging Basel III
New Capital Rules Offer Key Exemptions For Community Banks, Set Regulatory Precedent
After a year of delays, comment letters, meetings with regulators and even an ICBA petition that collected more than 17,000 signatures, the key Basel III capital rules are in the books. For community bankers, it lined up as a classic regulatory compromise. We did not get the complete exemption we’ve advocated since the original proposed rules were released in June 2012, but regulators did offer several important concessions for community banks. And there was even a twist at the end, with a proposal to implement a stricter leverage ratio standard on the largest banking institutions. Community bankers should be proud. We’ve made a significant difference on the potential impact of these rules on our industry, and the proposed leverage rules set an important precedent in our industry’s fight for tiered regulation. Of course, we still must be ready for the new reality of the regulatory capital rules. Basel on the books. First things first, the core Basel III rules are now final, and community banks are not exempt. Despite their original formulation to enhance capital levels at the largest and riskiest financial institutions, the Basel III standards became an overnight concern when regulators issued proposed rules that applied the standards to all banks, regardless of their size. residential mortgages (i.e., 50 percent risk weight for exposures secured by a first lien on a one-to-four family residential property). Banks will not be subject to the more complex and onerous risk-weight schedule of Basel III, as originally proposed, which would have required loan-to-value ratios to calculate risk weights for mortgages. Additionally, banks with assets under $250 billion will have the option not to include accumulated other comprehensive income (AOCI) as regulatory capital. This will ensure that community ?[?? ?Y?[]?H?\][ ?][?? ?[?H\?? ??][K??\?\??[???[????\[?Y\? ?]\??] ?\?? [? MH?[[??[???[?YH ?[?? YH H ???YY ????H ?\? \ ?Y?\??Y ?X?\?]Y\?\? ?Y?[]?H?\][ ???\?[? ?] H ??\?[??? H??[??[Y[?Y[?? H? Q??[??X? ?[?[Y\?X?[? ?X?Y[? ??Y?[]??Y??&] ?? \?K?[?Y][? ? H?\?[RRH??XZ??????[][?] H?[??? ^H[ ?? ?[X\?YH?]? [? ?[\??H[?[??Y ?\ [Y[?\?H]?\?Y?H ?][? ?[?\? ???\?Z[?\??H?[?[??X[?\?\?H ????[ ??[\ HH
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