November 09, 2012

U.S. banking regulators do not expect proposed rules requiring financial institutions to hold more capital to take effect at the start of next year, three agencies said on Friday.

The rules, which were proposed to implement an international agreement known as Basel III, were to be phased in over six years starting on Jan. 1, 2013.

Because of the volume of comments submitted in response to the proposed rules, the Federal Reserve, Federal Deposit Insurance Corp and Office of the Comptroller of the Currency said the rules would be delayed.

The Basel III agreement to require banks to hold more capital is considered one of the most critical reform efforts to make sure the global banking system is more resilient in the aftermath of the 2007-2009 financial crisis.

Under the proposed rules, banks would have to hold about three times more basic capital, and the biggest banks would hold even more. The amount of reserve capital that banks must hold would be determined, in part, by the riskiness of their assets.

Regulators did not indicate when they plan to finalize the proposed rules.

Banks have agreed that they need to hold more capital to guard against losses, but have criticized the particulars of the proposed rules.

Industry groups have said the January effective date would not give institutions, especially community banks, enough time to comply with the rules.

Large banks say the rules go too far in forcing them to hold extra capital. Smaller banks have argued that extra costs to comply with the rules could hurt their ability to lend, stifling the U.S. economic recovery.

Some regulators also have criticized the rules' complexity. A bipartisan group of 53 lawmakers asked regulators in September to consider whether community banks should have to comply with the new standards.

A U.S. Senate committee plans to hold a hearing next week with officials from the three bank agencies to discuss the impact of the proposed rules.

Copyright 2012 by Reuters. All rights reserved.

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