Senator Shelby called on the Banking Committee to conduct a rigorous review of the banking agencies’ proposals to ensure that the goal of Basel III is actually achieved. The Committee cannot simply rely on agency assurances that their proposed rules will leave
banks properly capitalized. Instead, banking regulators must demonstrate to the
Committee that their proposed rules are
supported by proper data and rigorous economic analysis. Regrettably, he said, the agencies have so far not provided
sufficient data and analysis of their proposals.
In October, Senator Shelby sent a letter to the banking agencies asking them to publicly release detailed estimates on how capital levels will change for US financial institutions under Basel III, how the agencies determined that those levels will leave the US banking system well-capitalized, and what will be the compliance costs. These are basic questions that should be publicly answered before this rulemaking proceeds, he said.
But, the response of the banking agencies to the
letter relied largely on studies by the Basel Committee, which used data only
from the very largest banks. For example, one key study included data
from only 13 U.S.
banks. In addition, the Basel Committee’s quantitative impact study aggregates
country results, noted the Ranking Member, and does not specifically show how
Basel III will impact the U.S.
Even more troubling to the Senator was the agencies’ belief that Basel III is
appropriate based on the losses experienced by US financial institutions, but
they do not provide data to support this conclusion.
Senator Shelby admonished the banking regulators to stop outsourcing their economic analysis to the Basel Committee and determine how Basel III will impact the diverse and unique
banking system and the overall economy.