Senate Banking Committee Holds Hearing on Proposed Basel III Rules

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On November 14, the Senate Banking Committee held a hearing regarding rules proposed by federal banking regulators to implement the Basel III international regulatory capital accords. The hearing featured testimony from representatives of the Federal Reserve Board, the FDIC, and the OCC, the federal regulators responsible for the proposed rules. Committee Chairman Tim Johnson (D-SD) and Ranking Member Richard Shelby (R-AL) asked regulators to explain the Basel III process generally, and the potential impact of implementation on community banks specifically. The committee also explored (i) the impact of proposed risk weights, particularly with regard to small banks’ willingness to offer mortgages, (ii) the treatment of accumulated other comprehensive income, (iii) the treatment of insurance businesses, (iv) sovereign debt ratings, and (v) the rulemaking process. The witnesses did not provide a timeline for the final rule or discuss any specific changes to the proposed rules to accommodate small banks’ concerns, but did promise a long implementation timeframe. The witnesses generally acknowledged those concerns and assured that they are considering them as regulators prepare the final rules.

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