As part of the Congress’ post election activities, two Financial Institution Subcommittee panels looked at the proposed Basle III capital rules. Both Republican and Democrat lawmakers demonstrated concern about the possible effects the new standards could have on the operation of community banks and the insurance industry.
The first panel to testify was made up of representative of the three federal regulatory agencies. FDIC, Federal Reserve and the OCC, who have primary responsibility for the installations and development of the capital rules. They repeated their recent testimony in the Senate. They said they would carefully consider the many comments that have been filed but pointed out that changes will be made since the current capital standards proved insufficient during the recent economic downturn.
Industry representative and public policy advocates testified on the second panel. Better Market’s Chief Economist, Marc Jarsulic, presented the Better Market position that the proposed capital rules alone are not adequate to address current weaknesses in the financial system. The Basle III rules do not require too-big-to-fail institutions to use sufficient equity financing to insure they remain solvent in the face of large asset price declines.