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ICBA Raises Community Bank Concerns, Offers Alternatives to Basel II Plans

Washington, D.C. (Sept. 26, 2006)—The Independent Community Bankers of America (ICBA) told the Senate Banking Committee that proposed Basel II capital rules for the largest U.S. banks are overly complex and place community banks at a competitive disadvantage.

"ICBA supports allowing Basel II banks to use the 'standardized approach' instead of the advanced approach to reduce costs and complexity and mitigate competitive disparities between Basel II and Basel I banks," said Camden R. Fine, ICBA president and CEO in a statement to Senate lawmakers.

ICBA commends the bank regulators for proposing to retain the leverage ratio capital requirement as part of Basel II. ICBA strongly believes that retention of the leverage ratio is essential to maintaining the safety and soundness of our banking system and is a needed complement to the Basel II advanced approach that is based only on internal bank inputs.

ICBA supports efforts to revise Basel I to make it more risk sensitive and narrow the gap between Basel I and Basel II banks, as long as highly-capitalized community banks can continue using existing risk-based capital rules to avoid unnecessary regulatory burden.

ICBA asked federal banking agencies to conduct another quantitative impact statement of the Basel capital rules to measure their effect on competition and on minimum risk-based capital levels. If the results indicate that there is still a competitive disparity between Basel IA and Basel II, the three-year Basel II transition period should be put on hold until the regulators determine how to fundamentally revise Basel II.

Read ICBA's statement at www.icba.org.