The American Bankers Association today offered its support for two proposals designed to tailor enhanced prudential standards for banking firms with $100 billion or more in assets. The association noted that the proposals are “a welcome recognition” that existing regulations do not sufficiently distinguish among banks with varying risk profiles.
Incorporating feedback from several banker-led working groups, ABA also offered several recommendations for further improving the enhanced prudential standards framework. For example, while the association agreed that the factors used to sort banks into categories were appropriate, it emphasized that these factors — including asset size, cross-jurisdictional activity, off-balance sheet exposures and others — should be “as precise and aligned to actual risk exposure as we can reasonably realize.” ABA called for these factors to be indexed to account for changes in firms’ relative potential systemic risk level.
ABA also encouraged the agencies to continue to review how the current set of prudential standards can be improved. The review should include the Basel III liquidity standards, the amendments related to tailored resolution and capital plans, as well as an ongoing effort to monitor and refine existing prudential standards, the association said. Read the comment letter.