Tarullo: Smaller Banks Need ‘Substantially Simpler’ Capital Regime

In remarks at an industry event today, Federal Reserve Governor Daniel Tarullo made one of his strongest statements yet about the need to minimize capital burdens on highly capitalized community banks — as the American Bankers Association has long advocated.

“Capital requirements for smaller institutions in the United States need to be simpler than they are,” Tarullo said. “When it comes to smaller institutions and certainly community banks — any institution under $10 billion — I think we can and should have a substantially simpler capital system, one that looks more like the original Basel I.”

ABA and the state bankers associations have strongly advocated — in letters and in person — for provisions exempting banks that are clearly highly capitalized from having to prove it via the complex and costly Basel III calculations.