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ICBA Commends Banking Agencies for Basel IA Proposal

Washington, D.C. (December 5, 2006)—The Independent Community Bankers of America (ICBA) praised the banking agencies today for issuing the Notice of Proposed Rulemaking Regarding Risk-Based Capital Guidelines, or Basel IA, and for extending the comment period for Basel II.

"ICBA is pleased that the Basel IA proposal contains a number of ICBA-backed initiatives, including expanding the overall number of risk-weight categories, using loan-to-value ratios to risk weight residential mortgage loans, and allowing non-Basel II banks to chose whether to adopt Basel IA standards or continue to apply current Basel I rules," said Karen Thomas, ICBA executive vice president and director of government relations. "We also commend the agencies for extending the comment period for Basel II as we recommended so that community banks have the opportunity to simultaneously study both proposals and assess their effects."

ICBA remains concerned about whether Basel IA adequately addresses the potential competitive disparities between the two accords, particularly in light of the information released today as part of the Basel IA proposal. Today's proposal shows that the Basel II banks will still require significantly less capital for most credit exposures than banks that adopt Basel IA. This would give Basel II banks a competitive advantage in pricing products and services and in return on equity to the detriment of community banks and the communities they serve.

ICBA will continue to work with the agencies to develop rules that enable community banks to respond to the banking needs in their communities.