MBA, ICBA Ask Federal Agencies for Update on Capital Rule Simplifications

The Mortgage Bankers Association and the Independent Community Bankers of America, in a joint letter to federal agencies, asked for a meeting to discuss the status of proposed rulemakings issued more than a year ago aimed at reducing regulatory compliance burdens, particularly on community banking organizations.

The Proposal, issued on September 27, 2017, focused on two specific areas:

–Regulatory deductions (more specifically, application of the Basel III rules to non-advanced approaches banking organizations); and

–High Volatility Commercial Real Estate.

In the Dec. 18 letter to the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System, MBA Senior Vice President for Public Policy and Industry Relations Stephen O’Connor and ICBA First Vice President of Accounting and Capital Policy James Kendrick noted the lack of action by the agencies and said financial institutions needed clear direction on these issues.

“The Associations strongly support the Agencies’ efforts to simplify the rules in order to reduce unnecessary complexity and eliminate provisions that create unnecessary burdens and hinder financial stability and economic growth,” the letter said. “However, it is frustrating that the Proposal has not been finalized, even after almost a year after the comment period closed.”

O’Connor and Kendrick said the lack of final rules “continues to create capital planning challenges for many banks due to lack of certainty on several issues addressed in the Proposal.” For example, recently, the Agencies issued proposed rules implementing the Community Bank Leverage Ratio framework–a provision that was included in the Regulatory Reform law passed by Congress this year. MBA and ICBA noted while this new provision provides an important benefit–regulatory burden relief–for qualifying community banks, including simplified regulatory capital calculations that would allow an entity to avoid the Basel III MSA rules, and therefore, not be subject to the rules under the Proposal.

“The fact is that some community banks would not qualify for this benefit because of the strict eligibility factors that apply under the CBLR framework,” the letter said. “In fact, many of our members would still be subject to the Proposal, which is yet to be finalized.”

MBA/ICBA asked the Agencies to “immediately” close the comment review period and finalize the Proposal reflecting our recommendations, “so that eligible community banks can take advantage of the simplified final rules. We are specifically requesting a meeting with the Agencies to discuss this issue in greater details.”