On June 8, the Federal Reserve released its interpretations of Basel III, choosing to implement rules and regulations dangerous to the entire banking industry, and especially harmful to community-based financial institutions.
In his Forbes article “Why Is The Fed Hitting Community Banks With ‘Too Big To Fail’ Capital Standards?,” Frank Sorrentino, Chairman and CEO of North Jersey Community Bank, points out there is cause for alarm with the “one size fits all” approach being adopted by the Fed. It will not only place unnecessary burdens on community-based institutions, it will cause further harm to Main Street by making access to credit more difficult for the small businesses that create 65% of our nation’s net new jobs.
I agree with Frank that regulators and policy makers must recognize the difference between “Too Big to Fail” banks and the local community institutions that disproportionately fund small businesses. Frank notes:
In the current environment where smaller institutions are disadvantaged in the capital markets, this new burden may be too much to handle. While all the nuances of the Federal Reserve’s report are being digested, the immediate effect will be for all banks to evaluate compliance with these capital standards and may actually lead some to decide that they need to slow their growth. This would not be good in our current state of the economy.
As I explain in Saving the American Dream, the road to economic recovery begins and ends with Main Street America. Policy makers need to aid economic growth by supporting our community financial institutions, not stifling them.
I encourage you to o read Frank’s article, which can be found here.