Financial industry trade organizations have been receptive to the prospect of various updates to the Basel III Endgame regulatory capital framework described by Federal Reserve Board Vice Chair of Supervision Michael Barr in remarks delivered at the Brookings Institution, Washington, D.C.
Below are statements published by trade associations representing a variety of banking institutions:
Consumer Bankers Association (CBA) President and CEO Lindsey Johnson:
“As we have long said, this proposal would significantly constrain banks’ ability to meet the lending needs of the millions of consumers and small businesses they serve. Given the economic headwinds millions of consumers face today, it’s more important than ever that regulators in Washington understand the cumulative impact regulations like this will have on the nearly two-thirds of consumers who are living paycheck to paycheck.
“Moving forward, CBA will continue to emphasize the clear reality that America’s leading banks remain well-capitalized, globally competitive, and have proven their resiliency to withstand the most severe economic scenarios.”
Mortgage Bankers Association President and CEO Bob Broeksmit:
“It appears that common sense has prevailed with the decision to re-propose the flawed Basel III Endgame proposal, a move that we have consistently called for since last summer in testimony before Congress, speeches, comment letters, and ongoing conversations with federal regulators.
“We support Vice Chair Barr’s recommendations to recalibrate some provisions that would have had negative impacts on single-family housing and commercial real estate finance markets. This includes removing the 20-percentage point risk-weighting add-on for single-family mortgages, which would have further diminished banks’ participation in mortgage lending while reducing credit availability for low- and moderate-income homebuyers.
“We look forward to reviewing and commenting on the re-proposal, which logic dictates should include the regulators’ quantitative impact study. We will continue to advocate for a bank capital framework – including reduced risk-weighting for mortgage servicing rights and warehouse lines – that ensures safety and soundness without reducing mortgage market participation and thus limiting choice and increasing costs for consumers.”
Bank Policy Institute’s (BPI) statement:
“BPI and its members look forward to reviewing the announced reproposal of the Basel III Endgame. We remain concerned about the process and the analytical rigor behind the proposal. The focus should not be on reaching a politically expedient top-line number but rather a bottom-up evaluation of each aspect of the rule to ensure it is based on data and proper analysis, not just a haircut on faulty math of the original proposal.
“The original process lacked a cost-benefit analysis, full transparency and recognition of the interconnectedness of capital requirements: it remains to be seen if this reproposal is the result of a better process. It’s also essential that the agencies take into account the extraordinary overlap with the stress test regime, the GSIB surcharge and other capital requirements — we need a holistic solution.
“Ultimately the final rule will have a significant impact on jobs, mortgages, small businesses, capital markets and the growth of the real economy overall. As Vice Chair Barr noted yesterday, it is imperative that we get this right, but the devil is in the details.”