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NEWS RELEASE
Oct. 14, 2008
ABA Media Contact: John Hall
(202) 663-5473
E-mail: jhall@aba.com
ABA SUPPORTS EMERGENCY PROGRAM, BUT FAIR VALUE
ACCOUNTING CHANGES NEED TO BE ADDED
Vast Majority of U.S. Banks Are Already Highly Capitalized
WASHINGTON – The American Bankers Association announced its support for the emergency financial action program announced this morning.
"While this is not a program ABA sought, the extraordinary crisis in our financial markets calls for extraordinary action that is designed to fully restore confidence," said Edward L. Yingling, ABA president and CEO.
In recent days, the ABA had expressed concern that speculation about the capital program was raising unfounded concerns about the U.S. banking system and had urged the Treasury to quickly announce the program. ABA had pointed out that, in general, U.S. bank capital levels were much higher than those in other countries where capital injections were being made mandatory.
"It is noteworthy that those banks which today announced they would be participating in the program are, like the great majority of U.S. banks, already well capitalized. Their participation will send the signal that markets should be completely confident in the strength of U.S. banks," said Yingling.
"While the capital program is available to all banks, given that 95 percent of our banks are well capitalized, we would not expect most banks to participate. However, it's possible that some strong banks could seek the additional capital as a means to support expanded lending needed to improve the economy, replacing the government capital as soon as the financial markets return to normal," he said.
The ABA also supports the temporary extension of the systemic risk exemption to cover non-interest bearing demand deposits and new bank debt.
"Given the fact that many countries were already moving to guarantee bank debt, this action was also needed for competitive equity, as well as to unfreeze inter-bank lending," said Yingling.
The ABA strongly believes that several further steps are badly needed. As stated in a letter from the ABA to SEC Chairman Cox yesterday, the SEC should move immediately, given the failure of the Financial Accounting Standards Board to act in a meaningful fashion, to address the problems caused by the continued use of fair value accounting in dysfunctional markets.
The capital program also needs to account for the differing capital structures of mutual institutions and banks organized as subchapter S corporations so that they have an equal opportunity to participate.
The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America's economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry's $13.3 trillion in assets and employ over 2 million men and women.
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