Independent Banker - November 2017 - 23

continue to be exempted, while
the existing minimum investor
contributions threshold would be
eliminated. This punitive treatment
could curtail growth in many
local communities.
More work to do
Overall, the proposal is a missed
opportunity to reduce the compliance
burden on community banks.
FDIC Vice Chairman Thomas Hoenig
himself spoke out against the
plan, calling it " neither simpler nor
less burdensome " and well short of
providing any meaningful benefi ts
to the industry and its customers. To
truly simplify the regulatory capital
regime, ICBA continues advocating
what it has called for all along-a
total community bank exemption.
The Basel III rules were originally
designed for the largest and
riskiest institutions and should
not apply to community banks,
which maintain strong capital
positions and high-quality balance
sheets. Regulators should employ
separate regulatory regimes that
rein in Wall Street excesses while
accommodating community banks'
straightforward models.
The best way to accomplish this
objective, ICBA has long argued, is
to exempt community banks from
Basel III and allow them to revert to
the Basel I capital framework.
ICBA achieved some signifi cant
victories in the Basel III fi nal rule,
including the exclusion of accumulated
other comprehensive income
from common-equity tier 1 capital,
allowing community banks to continue
using the Basel I risk weights
for their mortgage exposures and
grandfathering the inclusion of
trust-preferred securities as tier 1
capital. But we have never given
up on a complete community
bank exemption.
In meetings with policymakers
and in a high-profi le grassroots
campaign (see sidebar), ICBA and
participating community bankers
have pushed hard for the community
bank exemption. If regulators
are unwilling to take such a step,
ICBA maintains a comprehensive
list of amendments that would
allow the capital standards to better
meet the community banking
model. For instance, the ICBA plan
would amend Basel III to refl ect
the loss-absorbing capacity of the
allowance for loan and lease losses
and exempt community banks from
the harsh provisions of the capital
conservation buffer.
Ron Haynie (ron.haynie@icba.org) is
ICBA senior vice president of mortgage
fi nance policy. James Kendrick
(james.kendrick@icba.org) is ICBA
fi rst vice president of accounting and
capital policy.
____________
_______________
Advocacy alert
Much is up in the air as regulators
reconsider the Basel III rules,
but ICBA will remain engaged
every step of the way. In meetings
with and messages to the
agencies, we continue our push
for a full exemption, but we need
the persistent engagement of
community bankers to make
the diff erence.
Stay tuned for updates and
grassroots alerts from ICBA, and
make your voice heard on this
promising opportunity for signifi -
cant regulatory relief.
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Independent Banker - November 2017

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