U.S. regulators won’t hold banking companies to a Jan. 1 deadline they wrote into proposed rules for boosting the reserves lenders must hold against potential losses, they said today.
The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency “do not expect that any of the proposed rules would become effective” at the start of next year, as they continue weighing views expressed during the comment period, they said in a joint statement.
The agencies are working “as expeditiously as possible” on rules proposed in June to align U.S. banks with standards set by the Basel Committee on Banking Supervision. The international accords set a Jan. 1 deadline for boosting capital requirements to guard against a repeat of the 2008 credit crisis. Most Basel committee member nations have yet to complete work on the rules.
Today’s statement was a response to concerns expressed by industry participants that they would have insufficient time to understand the rules or make system changes by Jan. 1. The American Bankers Association, Financial Services Roundtable and the Securities Industry & Financial Markets Association have said the rules as proposed could hurt credit availability, damp economic growth and hurt U.S. competitiveness.
“As with any rule, the agencies will take operational and other considerations into account when determining appropriate implementation dates and associated transition periods,” the Fed, FDIC and OCC said in the statement.
The U.S. proposal calls for all banks to maintain “loss-absorbing capital” of at least 7 percent of risk-weighted assets.
David Stevens, president and chief executive officer of the Mortgage Bankers Association, called the delay a positive development that may signal regulators “are going back to the drawing board.”
“It is critical now that regulators re-propose Basel implementation rules that more appropriately allocate risk-weights on real estate-related assets,” Stevens said in a statement. “Otherwise, credit for real estate transactions will tighten and consumer and borrower costs will go up, as banks reduce their real estate lending and mortgage servicing business.”
The delay is “disappointing news” but not surprising, according to Sheila Bair, who served as FDIC chairman during the period when the Basel accords were being negotiated.
“It is important for the U.S. to exercise leadership,” she said in an e-mail statement. “We don’t want to send a signal to the world that we are backing off in any way.”
Bair, who said she shares industry concerns that the U.S. proposals are too complex, leads a group of former regulators, lawmakers and business leaders that favors giving priority to imposing Basel rules for “large, internationally active banks” and boosting the leverage ratio to 8 percent.
Representatives from the Fed, OCC and FDIC will face questioning on Basel implementation on Nov. 14 at a Senate Banking Committee hearing on the rules.