ABA welcomes congressional review of proposed capital standards

The American Bankers Association strongly supports efforts by the House Financial Services Subcommittee on Financial Institutions and Monetary Policy to investigate “the chaotic state of global financial standards,” such as the proposed U.S. adoption of the Basel III “endgame” capital standards, the association said Tuesday in comments to the subcommittee, which held a hearing on the topic that same day.

Many smaller banks were surprised and frustrated by the manner of the U.S. participation in the Basel Committee’s deliberations, given that the public was told the standards would only apply to large, international institutions, ABA noted. However, federal regulators’ proposed implementation would go far beyond that scope. “As a consequence, when the Basel III regulations were proposed, they touched off a high level of public and congressional controversy, something that we believe could have been avoided and that should be avoided in connection with any future development of international financial services standards.”

ABA has encouraged the banking agencies to adopt a public process that brings greater transparency and accountability to U.S. participation in the development of international regulatory standards, increasing the likelihood for better understanding and consensus on standards, the association said. “This can be done by requiring regulators to clearly present for public review, as well as oversight by Congress, the substance and potential scope of a nascent international standard using an advance notice of proposed rulemaking—an important transparency and accountability process that is already part of U.S. administrative procedure,” ABA added.