The Independent Community Bankers of America (ICBA) and its affiliated state associations are urging the Federal Housing Finance Agency to align its capital rules with those of the federal banking agencies.
This is necessary, states ICBA officials, to avoid penalizing community banks for supporting local communities during the COVID-19 pandemic.
“Failure to fix this inconsistency in the regulations may exacerbate a stress as banks continue to navigate rising rates and the ongoing macroeconomic volatility. This, in turn, may impair banks’ ability to provide credit to U.S. businesses and households, especially the more vulnerable sections of our economy. We encourage the FHFA to work closely with the bank regulators to better align their regulations,” the ICBA, the American Bankers Association, and their respective affiliated state banking associations wrote to the director of the FHFA, Sandra Thompson.
If the FHFA does not update its standard to match banking regulators’ accounting requirements, FHFA’s capital restrictions on accessing Federal Home Loan Bank advances could transform the short-term market decline in bond prices into a longer-term problem for the banking system.
To remedy this, the groups called on the agency to issue an interim final rule aligning its regulations on tangible capital with relevant Federal Deposit Insurance Corp. regulations regarding Tier 1 capital. This will ensure that FHFA rules align with federal banking agency changes enacted a decade ago.
The groups are requesting the change given the impact of sudden changes to bond market values.