SIFMA, ABA and FSR Comment Letter to Federal Agencies on Proposals to Revise the Regulatory Capital Framework for U.S. Banking Organizations

SIFMA, American Bankers Association (ABA) and Financial Services Roundtable (FSR) (collectively, the "Associations") submitted a letter on three notices of proposed rulemaking issued by the OCC, the Federal Reserve Board and the FDIC ("Agencies") which would comprehensively revise the regulatory capital framework for all U.S. banking organizations. The proposals include: (i) Basel III Numerator NPR; (ii) Standardized Approach NPR; and (iii) Advanced Approaches NPR (collectively, the "proposals"). In the letter, the Associations asserted that the Agencies have employed an overly conservative approach by seeking to impose Basel III almost wholesale in addition to, and contemporaneously with, the Dodd-Frank regulatory regime.

The Associations argue that some aspects of the proposals would "hinder credit availability, dampen economic growth and harm the competitiveness of the U.S. banking system and the U.S. financial sector." Specifically, the Associations have concerns regarding: (i) the proposals' lack of appropriate risk calibration; (ii) the timing of their implementation; (iii) the significant divergence from and additions to internationally agreed-upon capital standards, and the absence of comprehensive quantitative analysis to justify these deviations and additions; and (iv) the adverse impact on the availability of credit in a recovering economy and on the U.S. banking system's competitiveness domestically and abroad.

The Associations provide several recommendations in the letter and urge the Agencies to perform, publish and invite comments on a comprehensive empirical study of the proposals, focusing on key areas such as the regulatory and economic impact of allowing unrealized gains and losses to "flow through" to a bank's common equity capital base, and the proposed risk weights for residential mortgage exposures.

View letter in full here (links externally to SIFMA website). See also: Press Release.