MCHENRY SAVINGS BANK
October 28, 2003
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Dear Mr. Feldman:
I am writing to you about the Basel I & II Accord. I do have concerns
about both for which I will explain each separately.
Basel I Accord Adopted in 1988 needs to be reviewed to more clearly
define the true risk weighting of a bank. Common sense will tell you
that a bank has more risk holding a 1-4 family mortgage with an 80% LTV
vs. a mortgage with at 50% LTV. Yet today's matrix puts both in the same
50% rated bucket. How can this logic truly show the true risk exposure
of a bank? Commercial Mortgages are weighted at 100% no matter what the
LTV might be. Should a bank have to sell good higher yielding Commercial
Mortgages sacrificing income even with a 50% LTV because of the risk
weighting formula? This issue needs attention.
Basel II, as proposed, does not allow smaller community the ability
to "opt-in" as is the case for larger banks. Size of an institution
should not be the determining factor in the ability of leveraging
capital as proposed by Basel II. Please re-consider the "opt-in" portion
of Basel II for smaller institutions.
Sincerely,
Wayne Amore
Sr. Vice President
McHenry Savings Bank
353 Bank Drive
McHenry, IL 60050