By the nature of their size, most community banks simply do not have access to the sources of capital that would be required to meet the requirements of the Basel III standard.
San Francisco, CA (PRWEB) November 15, 2012
While U.S. banking regulators are contemplating the implementation of the Basel III international banking standards, local and community banks have protested inclusion based on the lack of involvement in causing the financial crisis.
The standards will change the amount of reserve capital required to be held by banks as well as redefining risk assessment for certain types of assets. The standards proposal was made by the Swiss-based Basel Committee on Banking Supervision, and adoption in the U.S. is being weighed by the Federal Reserve and other bank regulatory agencies.
Opposed to the new regulations are more than 15,000 community banks and allies. The Independent Community Bankers of America have reported that these banks have signed a petition that calls for small local and community banks to be exempted from the proposed new regulations.
Community bankers feel that should small banks be required to adhere to the new reserve capital requirements, the ability to lend to small businesses will be seriously restricted. Prior Small Business Administration reports have shown that over 50 percent of the job growth in the U.S. can be attributed to small businesses.
“The community banks are not what created the mess on Wall Street. But it penalizes community banks to where we really have the potential of stymieing lending at the time when we need it most in recovery mode,” said Ron Thigpen, the chief operating officer for Georgia Bank & Trust in the Augusta Chronicle.
In very simple terms, the Basel III standard would require banks to hold 10 percent of their capital as reserves. In essence, this means that $1 out of every $10 would be unavailable for lending to commercial enterprises and residential loans.
Banks unable to meet these requirements would be forced to reduce the number of loans on their books, or raise additional capital. This would cause many community banks to turn away borrowers, or attempt to raise capital in a difficult economic climate. By the nature of their size, most community banks simply do not have access to the sources of capital that would be required to meet the requirements of the Basel III standard.
The Independent Community Bankers of America (ICBA) claim that the new regulations, meant to avoid another financial crisis, are a penalty being imposed on the small banks, who bear no responsibility for the crisis.
“...Applying overly complex capital rules on community banks will fuel concentration in the banking industry, leaving small businesses and consumers with fewer banking options,” said ICBA President and CEO Camden Fine.
ICBA is petitioning the Federal Reserve to apply the Basel I standards to small banks. In previous Basel standards, implementation was not required for all financial institutions. The inclusion of all financial institutions in the Basel III standards is what makes them of such concern to small banks across the U.S. - and to small businesses as well.
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The Lending Circle, a division of Sunovis Financial, works to address the great pent-up need for financing nationwide, and will help borrowers with their needs whatever they may be. Their broad network of lenders is positioned to provide capital where it can do the most good.