FDIC leader cites concerns noted in comments over ‘Basel III endgame’ proposal, including mortgage exposures, trading securities

Concerns about treatment for residential mortgage exposures, among other things, are arising in comments about proposed, new capital requirements for large banks, the chairman of the board for the bank deposit insurance agency said Tuesday.

In testimony before the Senate Banking Committee, Federal Deposit Insurance Corp. (FDIC) Board Chairman Martin Gruenberg said comments on the “Basel III endgame” proposal issued by the federal banking agencies in July have voiced a variety of concerns.

In addition to treatment for the mortgage exposures, Gruenberg said, commenters said they were alarmed about the proposal’s treatments for certain tax credit equity investments, trading securities, and banking activities that generate large amounts of fee-based revenue.

The capital proposal made in July would raise capital standards for banks with $100 billion or more in assets. The proposal also requires the banks to hold long-term debt. Regulators have called the proposal the last major bank regulatory plank designed to address failures from the global financial crisis of 2007-2008. The comment period was extended once to January (from Nov. 30).

In October the Federal Reserve announced it would conduct a data collection to gather more information from large banks affected by the proposal. The data collection, according to the Fed, is intended to further clarify the estimated effects of the proposal and inform any final rule, with summaries to be made public. The submission deadline for the data collection is Jan. 16 – the same date as the new comment period deadline.

Remarks by Chairman Martin J. Gruenberg on Oversight of Financial Regulators: Protecting Main Street Not Wall Street Before the Committee on Banking, Housing, and Urban Affairs, United States Senate