Independent Community Bankers of America officials said the organization is encouraging the Federal Housing Finance Agency (FHFA) and banking agencies to align capital rules or risk negatively impacting community banks.
“Without federal regulators collaborating to immediately align their capital rules, community banks may soon be forced to realize what are now only unrealized losses — an unfortunate outcome that could needlessly undermine access to liquidity amid a period of economic volatility and uncertainty,” ICBA President and CEO Rebeca Romero Rainey said. “Proper regulatory action now can prevent a needless negative outcome going forward for community banks and the communities they serve.”
The ICBA recently forwarded correspondence to the FHFA and the other banking agencies. This communication follows a previous joint letter to the FHFA from the ICBA, the American Bankers Association, and affiliated state banking associations.
“The Independent Community Bankers of America (ICBA) is writing you to underscore our concerns that a regulatory inconsistency between the Federal Housing Finance Agency (FHFA) and the Primary Federal Regulators (PFR) is inhibiting otherwise safe and sound community banks from ready, certain, and immediate access to advances from the Federal Home Loan Banks (FHLBs),” the ICBA wrote. “Unprecedented government stimulus activity during and in response to the pandemic resulted in community banks investing in low-risk U.S. Treasuries – a move that is rarely criticized as unsafe or unsound.”
Unrealized losses in reliably stable portfolios unnecessarily undermine community banks’ access to liquidity due to the FHFA and the PFR maintaining inconsistent rules for community banks’ tangible capital.