ABA: Basel Proposal on Interest Rate Risk ‘Overly Prescriptive’

The Basel Committee on Banking Supervision yesterday proposed an interest rate risk capital requirement, which ABA deemed “out of line with the regulatory program in the U.S.” The committee is considering two approaches to the bank capital rule: a mandatory global minimum capital requirement or a flexible approach that would allow discretionary practices by national jurisdictions. Under the rule, banks would have to publish how much capital they hold.

“U.S. banks have highly granular knowledge of their customers’ behavior that they already share with banking regulators and know how to manage their own institution’s unique approach to interest rate risk better than the technicians across the sea,” said ABA President and CEO Frank Keating in a statement released yesterday. “They should not be shoehorned into a global, one-size-fits-all approach that fits no one well and risks disrupting ongoing programs to prepare for higher interest rates.”

The Basel Committee has solicited public comment on the proposal until Sept. 11, after which the committee will decide on which approach to take and when the first rule would take effect. For more information, contact ABA’s Hugh Carney.