Washington, D.C (June 13, 2018)—The Independent Community Bankers of America® (ICBA) today announced that it opposes a proposal from federal regulators to ease capital requirements on the largest and riskiest financial institutions. The proposal to roll back capital standards on global systemically important bank holding companies, or GSIBs, and their federally insured subsidiaries would make them more likely to fail and put the banking system at greater risk, ICBA told the Federal Reserve Board and Office of the Comptroller of the Currency.
“Community banks will never forget the impact of the 2008 economic downturn when the looming failure of our largest banks threatened to bring down our entire financial system resulting in a bailout at taxpayers’ expense,” ICBA Executive Vice President and Senior Regulatory Counsel Christopher Cole wrote in a comment letter. “The GSIBs, with their immense size, international scope and exposure, and interdependence on one another and desire to take elevated risks, should not be allowed to operate in our financial system without elevated levels of high-quality capital that will be able to absorb credit losses should another economic downturn occur.”
The agencies’ proposal would reduce capital levels required by the ICBA-supported enhanced supplementary leverage ratio standards that were introduced in 2013 to address the problem of too-big-to-fail financial institutions. The proposal would slash minimum tier 1 capital requirements by $9 billion for the GSIB holding companies and $121 billion for their depository subsidiaries, according to the agencies. By comparison, the Deposit Insurance Fund that the FDIC maintains to insure the nation’s banking system holds $95 billion, illustrating the magnitude of the proposed capital reduction.
ICBA’s comment letter calls on the agencies to retain the current capital standards to protect against further disruptions to the banking system and economy from the nation’s largest financial firms. ICBA will continue working with regulators to preserve megabank capital standards that will promote a safe, sound and secure banking system.
The Independent Community Bankers of America®, the nation’s voice for nearly 5,700 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services. For more information, visit ICBA’s website at www.icba.org.