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Senators debate Basel III

By Marcie Geffner · Bankrate.com
Thursday, November 15, 2012
Posted: 5 pm ET

Four years after the near-collapse of the U.S. financial sector, the federal government is still grinding slowly forward toward implementing new stricter capital requirements for banks.

Another small step was taken this week as the U.S. Senate Committee on Banking, Housing and Urban Affairs held oversight hearings to explore the applicability of proposed Basel III international banking rules to domestic financial institutions.

In a prepared statement, committee chairman U.S. Sen. Tim Johnson (D-S.D.) expressed concerns about whether the capital rules might impair community banks' ability and willingness to originate mortgages in rural areas, make interest rate management more difficult for smaller banks and adversely affect traditional insurance companies.

Ranking minority committee member U.S. Sen. Richard Shelby (R-Ala.), also in a prepared statement, then slammed the regulatory agencies for not setting adequate capital requirements prior to the financial crisis, suggested they still aren't up to doing the job and complained that they hadn't provided what he considered sufficient data or rigorous economic analysis of the proposed rules.

"It is time that our banking regulators stop outsourcing their economic analysis to the Basel Committee and start doing their own work. They need to determine how Basel III will impact our diverse and unique banking system and the overall U.S. economy. They also need to end their cloistered approach to rule-making," Shelby said.

Three weeks earlier, committee member U.S. Sen. Mark Warner (D-Va.) delivered remarks about the Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes the issue of bank capital requirements, at the Bipartisan Policy Center, a nonprofit Washington, D.C.-based think tank that promotes bipartisanship in political dialogue and policy-making. Warner appears to be a voice of moderation on the issue, pushing for technical corrections to Dodd-Frank.

"There's a lot of places we got it wrong," Warner said. "Congress never gets it right, when you're looking at massive reform legislation, the first time through. History is always replete with the notion that you directionally head into an area and then you come back two or three years hence and you do a corrections legislation."

Meanwhile, banks can only wait, lobby their hearts out and see what corrections that legislation might include.

Follow me on Twitter: @marciegeff

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