Banking Committee Chairman Johnson believes the higher levels of capital required under Basel III are appropriate. He is concerned, however, about certain aspects of the far-reaching requirements and feels the rule rules warrant careful examination. Specifically, issues of concern to the Chairman include the effects of the capital standards on community banks, interest rate management issues and the impact of the new rules which may be applied to the insurance industry.
Senate Shelby, Ranking Member of the Committee ,believes the Basel III standards are worthy goals but he doubts the ability of the financial regulators to fairly administer them. He feels the regulatory agencies lack the appropriate data and analysis as they have relied on the Basle Committee’s cost benefit studies which remain unavailable to the American public.
Representative of the FED, OCC and the FDIC reminded the Committee that the existing capital standards had proven insufficient during period of economic stress.They acknowledge that before the comment period ended in October, the agencies had received about 1500 comment letters. The agency representatives pledged to carefully consider positive suggestion but expressed the view that the new standards would significantly lower the probably of a future banking crisis and associate economic losses while having only modest negative effects of the gross domestic product.