Joint Comments to the Board, FDIC and OCC on the Quantitative Impact Study of the Potential Effects of Proposed Regulatory Capital Rules

Ladies and Gentlemen:

The Bank Policy Institute, the American Bankers Association, the Financial Services Forum, the Institute of International Bankers, the Securities Industry and Financial Markets Association, and the U.S. Chamber of Commerce are writing with respect to your agencies' jointly proposed rulemaking that would amend the capital requirements applicable to large banking organizations, and in particular to the agencies' promised "quantitative impact study" of the proposal's effects on bank capital requirements.

As the agencies have clearly acknowledged, this data collection and analysis is necessary to fully understand how much capital the proposed rule's revised risk weights and other changes would require covered banks to hold, and thus is an essential prerequisite to the agencies properly and accurately weighing the relative costs and benefits of each aspect of the proposed rule and the rule as a whole.

Indeed, the agencies state in the preamble to the proposed rule that the preliminary impact estimates the agencies included with the proposal suffer from at least three severe limitations:

First, these estimates heavily rely on banking organizations' Basel III QIS submissions. The Basel III QIS was conducted before the introduction of a U.S. notice of proposed rulemaking, and therefore is based on banking organizations' assumptions on how the Basel III reforms would be implemented in the United States. For market risk, the impact of the proposal further depends on banking organizations' assumptions on the degree to which they will pursue the internal models versus the standardized approach and their success in obtaining approval for modeling.

Second, for banking organizations that do not participate in Basel III monitoring exercises, the agencies' estimates are primarily based on banking organizations' regulatory filings, which do not include sufficient granularity for precise estimates. In cases where the proposed capital requirements are difficult to calculate because there is no formula to apply (in particular, the proposed market risk rule revisions), impact estimates are based on projections of the other banking organizations that submitted QIS reports.

Third, estimates are based on banking organizations' balance sheets as of year-end 2021, and do not account for potential changes in banking structure, banking organization behavior, or market conditions since that point.

Download the comment letter to read the full text.