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Banks want Basel III study

By Marcie Geffner · Bankrate.com
Tuesday, November 27, 2012
Posted: 6 pm ET

Demanding a study is a time-honored tactic of lobbyists who want to kill -- or at least delay -- government proposals that might hurt their clients.

So it's no surprise that the Financial Services Roundtable, or FSR, which represents 100 banking, insurance and financial investment companies, wants federal banking regulators to study the risk weights that are part of the proposed new bank capital requirements known as Basel III.

Specifically, the organization wants regulators to "conduct an empirical study to demonstrate that the proposed revised risk weights are correlated with actual differences in risk."

That request was made in a 181-page comment letter submitted to regulators by the FSR along with two other groups, the Securities Industry and Financial Markets Association and the American Bankers Association. The details of the request can be found in "Annex-B" around page 80 of a densely packed document that reads as if it were written by a roomful of attorneys.

The letter also specifically warns regulators to be aware of how the proposed capital requirements might affect the U.S. economy, a common argument applied to any new regulation in these days of slow economic growth.

"The proposals … would represent the most comprehensive overhaul of the U.S. bank capital framework in over two decades and would start to take effect at a time when the United States is only beginning to recover from a deep economic recession," the letter stated.

The letter also recommends that banks shouldn't be required to comply with the new regulations for at least one year after a final rule is published. The industry associations also have called for an extended compliance period for community banks and savings-and-loan holding companies.

How the capital requirements and cost of compliance will affect community banks has been the subject of much debate as trade organizations and Congressional representatives have issued a flurry of statements arguing these regional financial companies should be exempt from the stricter rules applied to global banking corporations.

Follow me on Twitter: @marciegeff.

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