ABA, associations raise concerns with proposed capital standards

The American Bankers Association, Bank Policy Institute and three financial sector associations said Wednesday that they have serious concerns about recently proposed changes to bank capital rules, and they want the Federal Reserve to give banks adequate time to analyze the proposal and comment on it.

In a speech on Monday, Federal Reserve Vice Chairman for Supervision Michael Barr proposed several revisions for capital standards, including new requirements for banks with more than $100 billion in assets and creating a new long-term debt requirement for institutions in that range. The associations responded in a letter to Fed Chairman Jerome Powell, saying that Barr’s review considered only the benefits of higher requirements and none of the costs. They also noted that regulators have repeatedly stated that the largest U.S. banks are well capitalized and a source of strength, but Barr’s comments “reflected a very different view, and we expect that any proposed rule based on that view will document its justification.”

The associations also disagreed with Barr’s characterization of changes to the risk-based capital requirements meant to implement the Basel III endgame. The international agreement sought to avoid increasing capital for large banks generally, they said. The groups urged Powell to allow a 120-day comment period on any proposed changes. Separately, ABA has advocated that the rule should be subject to an advance notice of proposed rulemaking, which agencies issue when they are seeking more information before moving ahead with the rulemaking process.