The discussion highlights the need for capital standards to be appropriately calibrated to the size, complexity, and business model of financial institutions. A one-size-fits-all approach is seen as detrimental to smaller, relationship-based community banks that are vital to local economies.
A central topic is the 25% cap on MSAs in the calculation of core capital, which penalizes banks with significant mortgage operations. This rule can force banks to sell off servicing, disrupting local customer relationships and impacting market stability.
Regulators confirmed their plan to introduce the Basel III endgame proposal before the end of March. This upcoming regulation is presented as the primary vehicle for addressing concerns like the MSA cap and implementing broader changes to bank capital standards.
The dialogue assesses the 2020 reforms to the ILC regulatory framework. FDIC Chairman Hill affirmed that the changes, which codified historical supervisory practices and strengthened parent company oversight, have been successful in ensuring the safe and sound operation of ILCs.
Keep pulling the thread on Chairman Hill.