WASHINGTON–The nation’s community bankers are unhappy with a proposal aimed at reforming capital requirements for the industry.
The proposed rule would implement a provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) requiring regulators to develop a leverage ratio of between 8% and 10% that banks with less than $10 billion in assets must meet to be exempt from risk-based capital requirements.
Regulators are proposing a 9% leverage ratio.
“(The Independent Community Bankers of America) is disappointed that regulators have proposed capital standards that are higher than necessary for Main Street community banks,” the ICBA said in a statement. “(The) proposal establishing a 9% leverage ratio unnecessarily leaves out more than 600 community banks that would be eligible if it were set at 8%, as authorized by Congress.”
The ICBA said it remains an “ardent proponent” of strong minimum capital levels for all banks, and said its support for the 8% ratio is “well above” the 5% leverage ratio requirement currently required of all well-capitalized banks, and “significantly higher” than 2019’s requirement of 7% common equity over total risk-based assets, which includes the capital buffer.
“Community banks did not cause the financial crisis of 2008-2009,” the ICBA said in its statement. “Their simplified balance sheets, conservative lending, and common-sense underwriting shield their regulatory capital from the kinds of losses incurred by the largest and riskiest financial institutions. ICBA and the nation’s community banks have long called for meaningful relief from the overly complex Basel III capital standards. Federal regulators should use the opportunity Congress provided with the passage of S. 2155 to complete this objective. We look forward to continuing to work with policymakers on this important policy.”