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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.

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CSBS Issues Scathing Indictment of Basel III NPRs

Now is the Time for All Community Banks to Act
October 4, 2012

There is a growing chorus of concerns about the harmful impact of the proposed Basel III rules on community banks.

Greg Gonzales, Chairman of the Conference of State Bank Supervisors (CSBS), issued a scathing indictment of the proposed Basel III capital standards and risk-weights. Excerpts from the CSBS Media Release of October 3, 2012 include –

“We are strongly supportive of the Federal Banking agencies’ efforts to improve the capital standards internationally and for systemic institutions. However, we are opposed to the approach put forth by the federal banking agencies to implement the Basel III capital accord and to incorporate a standardized approach to risk-weighted assets.”

“[The agencies/regulators] are building a capital framework that is more complex and more prone to volatility.”

“The proposed rules are highly reactionary to the most recent economic events and do not represent a thoughtful, long-term approach in the best interests of the U. S. Banking system or the national economy.”

“We do not believe there is sufficient support for many of the specific risk-weights in the framework.”

“At a time when the government lacks a long-term solution to housing finance, the proposed framework would further stifle mortgage lending by traditional depository institutions.”

“An overly complex capital structure will only increase the cost to the industry, curtails credit availability, and drive industry consolidation. This is not in the economic best interests of the United States and it will be especially damaging to the economic prospects of local communities … across the country.”

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. Find CBAI’s comment letters and more at CBAI's Basel III Resource Center.

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Enhance the Basel III Regulator Capital Estimation Tool

Now is the Time for All Community Banks to Act
October 2, 2012

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. Find CBAI’s comment letters and much more at CBAI's Basel III Resource Center.

Michael Stevens, Executive Vice President of the Conference of State Bank Supervisors (CSBS), joins CBAI in voicing his concerns and the call for community banks to contact their regulators about the impact of Basel III when he said recently, “The industry needs to communicate to the agencies how the proposed rules will impact the way they manage their balance sheets and extend credit. We need a strong banking system with sufficient capital, but one that can also fuel economic development and job growth.” (CSBS Examiner 9/28/2012)

The CSBS has provided banks with suggestions for enhancing the regulators’ Basel III calculator.

Want more out of the Basel calculator?

The Regulatory Capital Estimation Tool provides a valuable look into the proposed rule. However, the result is static based only on the bank’s June 30 call report numbers. The CSBS Examiner offers the following suggestions to enhance the understanding of the proposed changes under a variety of potential scenarios:

    1. Alter the bank’s loan mix. Given the current state of the economy, the portfolio may be more conservative than typical. What if the bank became more aggressive with mortgage lending? What if construction lending were to increase?
    2. Change the value of unrealized gains or losses on available for sale securities. (Basel III Approach Values, cell C7). With the rate environment, many banks have appreciation in their bond portfolios. Under the proposed rules, this has the effect of adding capital. What will happen when rates rise and this appreciation evaporates or even becomes a loss?
    3. Grow the bank. A growing economy will offer growth opportunities for a bank. How do proposed changes in risk weights and growth impact a bank’s ability to remain well capitalized?
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Basel III Myths and Facts

Now is the Time for All Community Banks to Act
October 11, 2012

Myth: Basel III only applies to banks with assets over $500 million

Fact: Basel III applies to all banks regardless of size. The proposal even applies to $50 million community banks in rural areas. There is an exemption for consolidated bank holding companies under $500 million, but even their banks are fully subject to the provisions of Basel III. There is no exemption for savings and loan holding companies of any size.

Myth: Inclusion of accumulated other comprehensive income (AOCI) in capital will help my bank meet regulatory capital requirements

Fact: While many community banks have positive balances in their AOCI positions, those positions are subject to volatility due to changes in interest rates and credit spreads. The current positive balances are a product of continual ultra low interest rates, which cannot be sustained forever. Rapid increases in interest rates and credit spreads can reverse the gain position and force it to become negative in short order. These changes would have an immediate adverse impact on your regulatory capital.

Myth: My bank maintains very high levels of tier 1 capital today so I won’t need to worry

Fact: Even banks that exceed current minimum regulatory capital levels should be concerned. Adverse changes to residential mortgage risk weights, new requirements for common equity capital, inclusion of AOCI in regulatory capital, phase out of trust preferred securities, along with the adoption of new capital conservation buffers will deplete your current capital position and over time could cause your bank to fail to meet new regulatory minimums.

Myth: The Basel III proposal has a long phase-in period so I will have plenty of time to get my bank ready

Fact: Although the proposal allows for a phase-in period for certain provisions, there are many headwinds that will hamper the ability for community banks to meet and maintain new minimum regulatory capital requirements. Ultra low interest rates, a fragile economic recovery, threat of another recession, and constraints placed on residential lending all could contribute to your bank failing to meet regulatory minimums once the phase in periods have ended. And because community banks do not have access to the capital markets, the limited sources of new capital include now and existing shareholders and retained earnings, which will not be easily generated in another economic downturn.

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.

Find instructions for submitting your own comment letter and more at CBAI’s Basel III Resource Center.

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Last Chance to Comment on Basel III

Now is the Time for All Community Banks to Act
October 17, 2012

One of the most important regulatory comment deadlines in memory will be here in less than a week!

CBAI has responded to the regulators and submitted specific recommendations regarding a dozen of the proposed Rules which would most negatively impact community banks. In addition, CBAI called for a community bank exemption to Basel III. Read CBAI’s Comment Letter.

CBAI is committed 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.

Find instructions for submitting your own comment letter and more at CBAI’s Basel III Resource Center.