Elizabeth forms body for su­per­vi­sion of banks

The Pak Banker - - Front Page -


Elizabeth A Duke, Mem­ber of the Board of Gov­er­nors of the Fed­eral Re­serve Sys­tem ad­dress­ing at the Com­mu­nity Bankers Sym­po­sium said it is a real plea­sure for me to have the op­por­tu­nity to speak to com­mu­nity bankers at this an­nual Com­mu­nity Bankers Sym­po­sium spon­sored jointly by the Fed­eral Re­serve Bank of Chicago, the Of­fice of the Comptroller of the Cur­rency (OCC), and the Fed­eral De­posit In­surance Cor­po­ra­tion (FDIC).

I know that many of you are con­cerned about the bank­ing agen­cies' re­cent pro­pos­als to re­vise the cap­i­tal rules, the so-called Basel III pro­pos­als.1 So I will start my re­marks with an up­date on those pro­pos­als.

Then I will move to a more de­tailed dis­cus­sion of some data that I have found in­ter­est­ing as I have been think­ing about the ef­fect of reg­u­la­tions as they re­late to res­i­den­tial mort­gage lend­ing.

Be­fore I be­gin, I want to as­sure you that all of my col­leagues on the Board of Gov­er­nors, in­clud­ing the Chair­man, are con­cerned about the ef­fect of reg­u­la­tion on com- mu­nity bank lend­ing. In fact, we have es­tab­lished a sub­com­mit­tee of the Board, which I chair, to fo­cus on the su­per­vi­sion and reg­u­la­tion of com­mu­nity and small re­gional banks.

In ad­di­tion, we have es­tab­lished a Com­mu­nity De­pos­i­tory In­sti­tu­tion Ad­vi­sory Coun­cil (CDIAC) made up of com­mu­nity banks, thrifts, and credit unions to ad­vise the Board about is­sues fac­ing smaller in­sti­tu­tions.2 But I want to also be clear that any opin­ions I ex­press to­day are my own and may not re­flect those of other mem­bers of the Board.

Let me turn now to the cap­i­tal pro­pos­als. As we en­ter the fi­nal de­lib­er­a­tive phase of this rule­mak­ing, I want to em­pha­size that the feed­back we have re­ceived dur­ing the com­ment pe­riod has been ex­tremely valu­able and that we will work very hard to ad­dress your con­cerns in the fi­nal rules.

Also, I would like to ad­dress the spe­cific con­cern ex­pressed by some bankers that th­ese rules will be ef­fec­tive Jan­uary 1, 2013, forc­ing them to po­ten­tially make changes with lit­tle prepa­ra­tion.

We have re­ceived a large num­ber of com­ments and want to closely con­sider each is­sue. There­fore, the agen­cies this morn­ing an­nounced that we do not ex­pect that any of the pro­posed rules would be­come ef­fec­tive on Jan­uary 1, 2013.3 Fur­ther, the agen­cies of­fered the as­sur­ance that in­sti­tu­tions will have time for tran­si­tion once the rules are ef­fec­tive.

Be­fore the pro­pos­als were is­sued, our staff of econ­o­mists and an­a­lysts con­ducted re­search to es­ti­mate the po­ten­tial im­pact of the pro­posed rules. Their anal­y­sis in­di­cated that the vast ma­jor­ity of com­mu­nity banks would al­ready meet the new stan­dards.

Nev­er­the­less, it was crit­i­cally im­por­tant to hear di­rectly from com­mu­nity banks to bet­ter un­der­stand how in­di­vid­ual in­sti­tu­tions and their busi­ness plans might be af­fected by the pro­pos­als. Ad­mit­tedly, the cap­i­tal pro­pos­als were quite lengthy and in many cases ap­plied only to the largest bank­ing or­ga­ni­za­tions. So, for the first time in a reg­u­la­tory pro­posal that I'm aware of, short sum­maries were added to the cap­i­tal pro­pos­als to ex­plain more clearly which as­pects were likely to af­fect com­mu­nity banks.

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