Benjamin Lawsky, head of the New York State Department of Financial Services, said that the proposed Basel III banking requirements would hurt small and mid-sized community banks, and he called on lawmakers to exempt smaller banks from the new regulations, Reuters reported Oct. 22.
In a letter to the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, Lawsky stated that “most community and regional banks did not engage in the risky behaviors that led to the financial crisis, and yet … they will be affected disproportionately by the increased complexity,” Reuters reported.
Lawsky has given banks a strong ally in their opposition to the complexity of the new global banking rules that are designed to prevent another major financial crisis. Under the new rules, banks would have to hold about three times more capital than under current regulations, and the amount of reserve capital would be dependent on the riskiness of banks’ assets.
Basel III will be phased in over the next six years, starting in January, but regulators in the U.S. have not yet finalized the reforms, Reuters reported. Public comments were due Oct. 22.
Community banks have repeatedly argued that the new rules would unduly burden them compared to their impact on large institutions. Lawsky argued that smaller banks still should have to meet higher capital ratios than those called for by current regulations, but he noted that risk-weighting calculations should mirror those under a previous Basel accord.