By: Michelle Patana
In a huge win for community banks, the Federal Reserve Board, Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency announced they would delay a global agreement on finalizing the rules of Basel III. They did not give a timeline for resuming discussions.
The agencies said that they would postpone finalizing rules due to "the wide range of views" of financial institutions, most of which have voiced loud opposition to the reforms. The delay may give community banks more time to develop a plan of action for complying with the new regulations, which impose higher liquidity and capital requirements on financial institutions. The move is expected to prevent future bailouts in the event that the economy sours again.
Wayne Abernathy, American Bankers Association executive vice president of financial institutions policy and regulatory affairs, told American Banker that the move also demonstrates that federal agencies are starting to actively listen to the concerns voiced by financial institutions.
"It demonstrates that the message is getting through that this is not a simple issue or small proposal, but a really big deal that affects people back home," Abernathy said. "I think what the regulators are recognizing is they need to be more than usually careful in making sure they take into account the various comments that are being made."
The delay does not appear to have caused tension in the international community, as many foreign banks also announced their own plans to postpone their involvement in the rulemaking, according to MarketWatch. For example, the governor of Bank of Canada said that other participating institutions were extending their timelines for implementing final regulations and hoped to have a plan in action around mid-2013.
Community banks win small victory
The move is being highly celebrated by community banks, which launched a tough campaign against the new regulations requesting that they be exempt. While regulators have not agreed to remove community banks from Basel III, the delay may suggest that talks are being carried out to lessen the impact small institutions may feel from a policy that was designed for national and international banks. Local institutions have long argued that the terms of Basel III would require them to drastically alter their banking strategies and programs to comply with the rules.