Grassroots ADVOCACY POLICY EXPERTS MEMBER ENGAGEMENT WASHINGTON WATCH Room for improvement The Basel III simplification plan, which includes standards for mortgageservicing rights, is so far a missed opportunity for community banks. By Ron Haynie and James Kendrick A fter years of ICBA advocacy, the federal banking agencies are developing plans to simplify the regulatory capital requirements for community banks, leaving the door open for a long-sought exemption. Unfortunately for the industry, the regulators' initial proposal is a mixed bag with much room for improvement. Following a Treasury Department report earlier this year proposing that federal banking regulators refocus the Basel III capital rules on the largest financial firms, the agencies in August announced plans to simplify the rules for community banks. They followed with proposals to simplify standards for mortgage-servicing rights and other high-quality assets and to reclassify other loans that regulators consider risky. Regulators initially proposed a pause in the phase-in of new regulatory capital deductions and risk weights for independentbanker.org ICBA IndependentBanker 21http://www.qmags.com/clickthrough.asp?url=www.independentbanker.org&id=20402&adid=P21E1