U.S. Senator Richard Shelby (R-Ala.), a senior member of the Banking, Housing, and Urban Affairs Committee, today introduced the Basel III Impact Study Act. The study would ensure that the capital requirements released by the Basel Committee on Banking Supervision appropriately balance the need for U.S. financial institutions to hold sufficient capital with the need to facilitate bank lending and economic growth. The bill would require the Federal Reserve, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation to conduct a quantitative impact study (QIS) on the effect of Basel III and relevant capital provisions in Dodd-Frank prior to issuing final rules. Shelby issued the following statement:
"Had Basel II been fully implemented before the crisis, our financial system would have been in even worse shape. Congress needs a detailed analysis of current and new capital rules to ensure that taxpayers are protected without unduly impeding bank lending or economic growth. Only a comprehensive examination of the impact on financial institutions large and small will meet this need."
On October 15, 2012, Shelby wrote to financial regulators calling upon them to conduct and release to Congress and the public detailed analysis of proposed capital rules. The Basel III Impact Study Act would compel this information in light of regulators' failure to provide it.
Contents of the Basel III Impact Study Act
The QIS would be required to estimate the cumulative impact of existing statutory requirements and the Third Basel Accord on capital levels, capital quality, asset quality and risk management at financial institutions.
The QIS would also provide an assessment regarding:
-Whether the proposed rules will cause capital levels to fluctuate more frequently and if any safety and soundness issues for banks or the financial system would arise as a result of such fluctuations
-What changes to capital levels on the whole as well as per asset class and institution size would result from implementation of these rules
-If total risk-weighted asset levels would increase or decrease
-Whether the rules will result in the discontinuation of banks' use of certain risk-based management tools
-The cumulative impact of the rules on gross domestic product in the United States
-The impact of the rules on the availability of credit in low- and moderate-income areas
-Whether the proposed rules will affect the availability of various types of credit, including residential mortgages, home equity lines of credit, auto loans, student loans, small business loans, and other commercial loans