• CSBS Issues Statement on Proposed Capital Rules
  • October 17, 2012 | Author: Robert L. Carothers
  • Law Firm: Jones Walker LLP - Mobile Office
  • On October 3, 2012, the Conference of State Bank Supervisors ("CSBS") issued a statement outlining its position on the federal banking agencies’ proposed risk-based capital rules. The statement begins by stating that CSBS supports higher levels of minimum capital and improvement in the overall quality of capital. However, it then sets forth its opposition to the federal banking agencies’ proposed risk-based capital rules which implement Basel III.

    The statement says that "the proposed rules are highly reactionary to the most recent economic events and do not represent a thoughtful, long-term approach in the best interest of the U.S. banking system or the national economy" and that the proposed approach is too complex and more prone to volatility. It also states that the standardized risk-weighted assets proposal would have a negative impact on mortgage lending and would likely cause banks to curtail or eliminate such products as traditional adjustable-rate mortgages and that banks will have "a very difficult time extending loans secured by home equity."

    According to the CSBS certain aspects of the proposed rules effectively serve to replace supervisory judgment and institution specific analysis. As an example, the statement discusses a new designation of "high volatility commercial real estate exposures" and states that the proposed 150 percent risk-weight for such exposures is "effectively telling institutions not to engage in this type of lending."

    The statement concludes by stating that the CSBS will submit comment letters on the Basel III and Standardized Approach proposals later this month and will ask the federal banking agencies to not adopt the proposed rules and to seek a more meaningful and less complex capital framework.