U.S. Senate Banking, Housing and Urban Affairs Committee Chairman Tim Johnson, D-S.D., and Ranking Member Mike Crapo, R-Idaho, are joining the many voices in Congress protesting proposed capital standards under Basel III as applied to community banks, and for that matter, insurance companies with thrifts who will be subject to the rules. They want to make sure that they are not only being heard, but “are being proactively addressed.”
Johnson and Crapo weighed in Feb. 13 in a letter to the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corp., urging the regulators to carefully consider the impact of the proposals on community banks and insurance companies, and to avoid unintended consequences.
Insurance CFOs suggested in an Oct. 22 letter to the banking regulators that because insurance companies that have savings and loans have not been regulated by the Fed previously, new capital requirements should not be applicable until July 15.
For community banks, one chief concern is that proposed Basel III treatment of a certain class of income, accumulated other comprehensive income, could increase volatility and make interest rate risk more difficult for small banks to manage.