Analysis: Most public comments oppose proposed capital standards

More than 97% of the public comments that banking regulators have received on the proposed capital standards for larger banks are in opposition to the rule change or expressed concerns about it, according to an analysis by the law firm Latham and Watkins. The firm examined the 356 comment letters that regulators received on the proposed U.S. implementation of the Basel III endgame and found that the vast majority expressed deep reservations. Concern came from a variety of sectors, with approximately 86% of negative comments coming from outside the banking industry. At the same time, a majority of elected officials from both parties expressed skepticism, including 225 members of Congress and 66 state and local government representatives.

“Opposition comes from a diverse array of domestic and international interests, including the financial services industry, public and private pension funds, retirement accounts, mutual funds, asset managers, manufacturers, the energy sector, agricultural interests, small businesses, medium and large corporations, real estate companies and mortgage stakeholders, market infrastructure providers, exchanges and insurers, and academics,” the firm said. “A substantial number of individuals, including members of civil rights organizations, also voiced their opposition.”

Many commenters noted that the banking sector is well capitalized and worried the proposed regulation would harm the overall economy, according to the analysis. Commenters said the rule would reduce credit availability, harm homeowners through its revised requirements for mortgage risk weighting, and reduce small- and midsize business lending. The firm said that groups such as the NAACP said the proposal would hit minority and underrepresented communities particularly hard, while representatives from the renewable energy industry expressed concern the rule would lead to less investment in their sector. Commenters also said the proposal would eliminate differing capital treatment for large regional banks.