The Independent Community Bankers of America (ICBA) commended efforts by federal agencies to simplify the Basel III regulatory capital standards for community banks.
The Federal Reserve Board, Office of the Comptroller of Currency, and the Federal Deposit Insurance Corp. proposed to simplify the capital rules’ treatment of mortgage servicing assets and other items. However, under the current capital rules, the transitional treatment for those items is scheduled to be replaced with a different treatment on Jan. 1, 2018. This, the agencies are looking to extend the existing transitional capital treatment for certain regulatory capital deductions and risk weights.
Banking organizations that are not subject to the advanced approaches capital rules are generally those with less than $250 billion in total consolidated assets and less than $10 billion in total foreign exposure.
“ICBA has been a longstanding vocal advocate for simplifying capital standards for the nation’s community banks,” Camden Fine, ICBA president and CEO, said. “This move by the federal banking regulators signals an acknowledgment that community banks maintain strong capital positions and high-quality balance sheets and should not be subjected to overly burdensome standards meant to rein in Wall Street excesses.”
ICBA also supports the plan to pause the full phase-in for some regulatory capital deductions and risk weights set to take effect for community banks on Jan. 1, 2018.
“ICBA applauds the agencies’ intention to simplify certain aspects of the capital rules for community banks, as well as their proposal to put on hold the current Basel III transition period that would have increased capital deductions and risk weights beginning in 2018 for certain assets like mortgage servicing assets (MSAs) and deferred tax assets (DTAs),” Fine added.
Fine said community banks have been hit hard by the Basel III capital treatment on quality assets like retained mortgage servicing rights.