via e-mail
November 3, 2003
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20219
Dear Mr. Feldman:
The Accounting & Tax Committee (the Committee”) of the New Jersey
League of Community Bankers* is pleased to comment on the Advance Notice
of Proposed Rulemaking addressing the implementation in the United
States of the new Basel Capital Accord (New Accord) being developed by
the Basel Committee on Banking Supervision at the Bank for International
Settlements.
The Committee agrees with the approach of the New Accord in trying to
more closely link minimum capital requirements with an institution’s
risk profile. It is, however, concerned about the potential of the New
Accord to create competitive inequities since only the largest financial
institutions will have the ability to adopt a more risk-sensitive
capital framework under the proposal. The New Accord could provide
significant capital savings for institutions that focus on mortgage and
other retail lending. While that is our member’s core business, the cost
and complexity of opting in to the New Accord does not make this a
viable option for most of our community bank members. Community banks
could end up holding higher capital under the current capital
requirements as compared with global and potentially more risky
institutions, making community banks a takeover target for institutions
that can deploy capital more efficiently under the New Accord. Community
banks might also find it more difficult to compete for quality assets
and be forced to operate with less capital in order to provide more
competitive pricing.
The New Accord should not be implemented in the United States until
more information is gathered about its competitive effects. The banking
regulators should work with the industry to develop a more streamlined
approach that provides the benefits and incentives of the New Accord to
all financial institutions operating in the United States.
Thank you for the opportunity to comment.
Sincerely,
James M. Meredith
Senior Vice President
New Jersey League of Community Bankers
411 North Avenue East
Cranford, NJ 07016-2444
*The New Jersey League of Community Bankers is a trade association
representing 71 of New Jersey’s savings banks, savings & loan
associations and commercial banks with total assets of over $50 billion.
The League’s wholly-owned subsidiary, the Thrift Institutions Community
Investment Corporation (“T.I.C.I.C.”) assists League members in forming
consortia to make loans on low-to-moderate income housing projects.
T.I.C.I.C. has facilitated loans on over 3,600 affordable housing units
throughout New Jersey and has loans in process on nearly 1,700 more
housing units.
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