Lawmakers Question U.S. Bank Capital Rule

by Patrick Lunsford, CollectionIndustry.com

Large international banks based in the U.S. have been crying foul over the Basel II accords for years now. It appears that some lawmakers in Washington have been listening.

Rep. Carolyn Maloney (D-NY) joined other lawmakers Thursday in backing the banks? central argument that many of the provisions in the Basel II capital standards will unfairly punish U.S.-based banks more than their foreign-based competitors.

“I am not confident that the current proposal is well designed,” said Maloney, a Democrat from New York. ?[The banks] are very apprehensive that the new rule will leave them at a significant disadvantage as compared to foreign institutions.”

At issue is the capital provision rule in Basel II that determines how much money the banks should hold as insurance against loan losses. The Basel II rules are enormously expensive for banks to comply with. Since the banks had hoped the capital rule provision would be streamlined, many have not taken up line-by-line compliance like their foreign counterparts.

The Basel II accord applies to only the largest and most internationally active banks in the United States: those with $250 billion in total assets or $10 billion of assets abroad, according to Reuters.

Rep. Barney Frank (D-MA), the ranking Democrat on the Financial Services Committee, also commented that he was impressed that the banks had come to such a consensus on the matter and that regulators would need to justify their argument rather than the other way around.