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FASB Issues Community Bank Exemption

August 9, 2012

At the urging of CBAI and ICBA, the Financial Accounting Standards Board (FASB) decided that nonpublic entities will not have to disclose the fair value amounts for financial assets and liabilities measured at amortized cost.

In a comment letter to FASB the CBAI stated that the fair value accounting change applied to community banks is more likely to mislead financial statement users than to provide them with a clearer picture of financial condition. The change would also be expensive for community banks to implement by requiring new accounting policies and practices.

The community bank business model is to make loans and hold them to maturity not actively buying and selling loans. Fair value or mark-to-market determinations are more appropriate for trading assets not community bank loans.

Community bank loans have unique risk profiles and are not readily marketable making them difficult if not impossible to determine realistic valuations. These loans would certainly be at a below-par or liquidation value from the very day they are made if FASB imposed this requirement.

The impact of aggressively discounted loan values would be devastating to community bank capital and surely jeopardize the very existence of many community banks. Read CBAI Comment Letter.

The FASB said that it would discuss at future meetings other disclosures (i.e. demand deposits) required of nonpublic entities).

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ACTION ALERT: Extend Basel III Comment Period Deadline

August 3, 2012

Dear Illinois Community Banker:

CBAI urges you to contact your primary regulator to request a 90-day extension of the public comment period for the joint-agency Basel III capital standard proposal. We have attached a copy of CBAI's comment letter for you to use as a guide.

CBAI strongly opposes subjecting community banks to the same capital standards as the nation's largest too-big-to-fail financial institutions. We are actively engaged with the various banking regulators in representing your interests and protecting your franchise value. Your cooperation is needed to extend the comment period which expires on September 7th.

We recommend that your personalized comment letter be organized as follows.

1. Introduction

  • An introductory sentence should include your name, title, the name of your bank, and a statement that the Fed/FDIC/OCC is your primary regulator.
  • Next should be a brief description of your bank's location, asset size, and business model or area of concentration (i.e., agriculture, small business lending, residential mortgage lending).
  • You should express your concern for the impact of the proposed NPRs on your bank’s capital position and thus your ability to serve your community.
  • The paragraph should conclude with your request for a 90-day extension to the comment period to properly assess the impact of the NPRs on your bank. 

2. Body Paragraph

  • The body paragraph should detail the areas of Basel III that most concern you (based on the information you have readso far) and the difficulty in analyzing the impact of the proposed NPRs on your bank within the comment period that expires on September 7th. 

3. Concluding Paragraph

  • The final paragraph should restate your request for a 90-day extension and provide your contact number and e-mail address for questions or additional information. 

Please do not personally sign the letter, or reveal confidential data, as letters will be posted by the regulators for anyone to view. Use the e-signature convention /s/ instead of your actual signature.

Comments may be submitted within the body of your e-mail or as an attached letter. CBAI's letter was sent as a PDF attachment.

Please make sure to include the Docket or RIN Numbers in the subject line so the regulators can properly direct the comments to the appropriate area.

Here are the detailed instructions for each of the three primary regulators:         

  • FDIC-supervised banks: Send comments to comments@FDIC.gov. Include “Basel III FDIC RIN 3064-AD95, RIN 3064-AD96, and RIN 3064-D97” in the subject line.         
  • Federal Reserve-supervised banks: Send comments to regs.comments@federalreserve.gov. Include “Basel III Docket No.1442” in the subject line.        
  • OCC-supervised national banks: Send comments to regs.comments@occ.treas.gov. Include “Basel III OCC Docket IDOCC-2012-0008, 0009, and 0010” in the subject line. 

Thank you very much!

Click here to access CBAI’s comment letter.

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Regulators Extend Basel III Comment Period

August 8, 2012

The federal banking regulators announced on August 8, 2012, that they have extended the comment period on the Basel III regulatory capital proposals from September 7, 2012 to October 12, 2012. CBAI and ICBA advocated for an extension of the comment period to allow community banks the time needed to study and fully determine the impact of the proposed rules on community banks. Read FDIC Announcement. Read CBAI’s Comment Letter.

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How Will Basel III Impact Your Community Bank?

August 30, 2012

Basel III is an important new regulatory challenge facing your community bank. Although the regulators have given additional time to submit comments, these proposed rules are complex and interrelated. They require time to assess the impact on your community bank.

CBAI staff attended a recent webinar on the impact of Basel III offered by CB Resources. We found the webinar and accompanying materials to be useful in our understanding of Basel III. While CB Resources is not an associate member of CBAI, and we do not officially endorse the webinar, you may want to consider attending on September 6, 2012 (noon to 1:30 Central Time). The cost is $300.00. Here is the link to their webinar registration site.

Even if you chose not to attend the webinar, CB Resources is making their publication CB Journal available free of charge with their analysis of Basel III. Here are the links to their Journal (Special Series part one and two, with more to follow in mid-September).

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CBAI Calls for Community Bank Exception from Basel III

Now is the Time for All Community Banks to Act
September 28, 2012

CBAI has strongly encouraged the banking regulators to exempt community banks from the proposed implementation of Basel III and allow community banks to continue to operate under Basel I capital requirements. Read Letter.

In our opinion, Basel III was originally designed to prevent another financial crisis and should apply only to the largest and internationally active banks. Community banks did not engage in the reckless behavior that contributed to the financial crisis and subsequent economic downturn. Community banks have lower risk profiles because they operate under a relationship-based business model.

CBAI is committed to inform you about Basel III and to vigorously represent your interests with the banking regulators. It is vital that you become familiar with the proposed rules covering new capital requirements and asset risk weights. If implemented as proposed, these rules may endanger the existence of your community bank. Your opportunity to inform the regulators about their impact on your bank and to help shape the rules will expire on October 22nd. Your voice must be heard! Now is the time to speak-up - and we can help. You can read CBAI’s comment letter and learn how you can comment on these harmful proposed Rules at CBAI’s Basel III Resource Center.