If the U.S. were to "walk away" from Basel III, and go with the straight 15% capital-to-assets favored by Senators Brown and Vitter for our largest banks, it would stifle our largest financial companies' ability to compete internationally.
"If the U.S. were to require higher capital requirements for its banks, I guarantee that China and other countries will not do the same," says Rodriguez Valladares. "They will certainly have more capital to play with."
A Potential Negotiating Position for Community Banks
Frank Mayer -- a partner in the Financial Services Practice Group of Pepper Hamilton in the Philadelphia -- says that "the genesis of this is really the regional and community banks with total assets of below $50 billion, feeling that they should not be covered by Basel III."
"The theme is that the main street banks didn't cause the crisis that precipitated Dodd-Frank, that the global regime is more suited to SIFIs and GSIFIs [Global SIFIs], and that the community banks are proportionally over-regulated," he says.Nearly three years into the implementation of the bank reform legislation, community banks are going through a particularly tough period, with declining net interest margins, as rates stay near record-low levels, and regulatory compliance burdens, and expenses, increase. "Dodd-Frank could certainly use some tweaking," according to Mayer, who adds that "certainly the regional and community banks might benefit from some exemptions." Frank Sorrentino -- CEO of ConnectOne Bancorp of Englewood Cliffs, N.J., says community banks should not be subject to Basel III, and not because of the capital requirements, since most community banks already have sufficient capital levels to comply. "What is realy offensive is the amount of paperwork that has to be done to demonstrate compliance," he says. Basel III "is going to cause a lot of expense" for community banks, according to Sorrentino, who adds that "expenses for banks actually cause capital deterioration," because banks will have lower retained earnings. "It is a very counterintuitive measure when you look at community banks." When discussing Dodd-Frank, Sorrentino says "the vast majority of the bill was designed around trying to eliminate a lot of the issues that led to the banking crisis, many of which the community banks didn't participate in. As we are seeing the law implemented, the playing field isn't necessarily fair in all aspects." "Probably the answer lies in having higher cap requirements for larger institutions," he says. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV