The Basel III Capital Impact Study Act

Floor Speech

Mr. FINCHER. Mr. Speaker, I rise today to introduce the Basel III Capital Impact Study Act. This legislation requires the federal banking agencies to perform a thorough quantitative impact study (QIS) of the Basel III proposed rulemakings, taking into account the impact Dodd-Frank provisions will have on financial institutions in the United States, and report their findings to the Senate Banking Committee and House Financial Services Committee. The bill would also amend the International Lending Supervision Act of 1983 (ILSA) by requiring the federal banking agencies to ensure that differences in rules that implement capital requirements do not give competitive advantages to any one group of financial institutions.

The federal banking agencies have sufficient authority to perform a QIS for Basel III without Congressional action, but they have not conducted and publicly shared the results of any QIS specific to U.S financial institutions. I am introducing the Basel III Capital Impact Study Act because we need more information about the effects of Basel III implementation. In my district, banks of all sizes have come to me with serious concerns about Basel III. While I appreciate that we want all banks to be as financially sound as possible, we must also be cognizant of homebuyers, small businesses, and families who need loans. We need to let banks do what banks do best, loan money. I don't want to see implementation of Basel III curtail business lending and slow our already weak economy.

Capital rules must be set in a manner that strikes the proper balance between safety and soundness and economic growth. The best way to determine whether such a balance is struck is to test new rules by examining the impact they will have on bank balance sheets and credit decisions prior to new capital rules taking effect. The QIS provides banking regulators with data that they can use to gauge the impact of proposed capital rules. This kind of pre-testing has been the model that was followed throughout the Basel process.

In the case of Basel III, the new rules require more than 7,000 U.S. depository institutions to make changes to their capital for the first time since the original Basel I rules took effect in 1992. The only review of the new Basel III rules was conducted through a ``macro'' level analysis conducted by the Bank for International Settlements. There has been no individualized analysis conducted in the U.S. This is problematic because there are thousands of U.S. banks that vary in size and business models covered under Basel III. Additionally, the lack of domestic scrutiny of the proposal means unique characteristics of the U.S. lending market, such as housing finance, have not been closely examined. Finally, the Dodd-Frank Act made a number of significant changes that will affect the capital and risk taking activities of U.S. institutions. These changes were not considered as part of the ``macro'' level review and should be factored in as part of some U.S. focused review of the new Basel III proposal.

We must make sure that financial institutions in the United States can continue to lend and do business with American families before moving forward with the implementation of Basel III.

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