Six banking trade groups Tuesday asked the Federal Reserve and other regulators to re-propose their sweeping updates to capital requirements — this time, showing the math.
“The proposed rule repeatedly relies on data and analyses that the agencies have not made available to the public,” the Bank Policy Institute and others wrote in a letter to the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. “This reliance on non-public information violates clear requirements under the Administrative Procedure Act.”
Some of the data and analysis may raise confidentiality concerns, the trade groups noted. But “nothing prevents the agencies from releasing such data and analyses in a manner that is anonymized or aggregated to the extent necessary to protect bank or other party confidentiality,” the groups wrote.
Regulators used “supervisory experience” as a catch-all justification for how they arrived at certain figures in the calculation of operational risk and the risk weighting of some types of lending, the trade groups said.
But regulators must show specific data to demonstrate that “elements of the proposed rule do not impose duplicative capital charges,” the trade groups wrote.
The groups also took issue with regulators’ plan to “collect additional data to refine [their] estimates of the rule’s effects” during the comment period, a move meant to “inform finalization of the rule.”
“Collecting such data during, rather than before, the comment period is … legally improper,” the trade groups said. “The purpose of the comment period is for the public to review the agency’s proposal, including any supporting evidence, not for the agency to finish doing work that should have been completed before issuing the proposal. The agencies cannot fill in the blanks in the final rule.”
The Fed and the FDIC declined to comment to Bloomberg on the matter. The OCC didn’t immediately respond to requests for comment.
The American Bankers Association, the U.S. Chamber of Commerce, the Financial Services Forum, the Securities Industry and Financial Markets Association, and the Institute of International Bankers signed the letter, in addition to the BPI.
The letter comes less than a week after two of the trade groups — the ABA and Chamber of Commerce — won a court victory against another banking regulator, after they argued the Consumer Financial Protection Bureau overstepped its authority by directing its examiners to look for discrimination in its efforts to root out unfair, deceptive or abusive acts or practices.
The Fed’s capital-requirements proposal, unveiled in July, would require the U.S.’s eight global systemically important banks to hold roughly 19% more capital. Representatives of a number of those G-SIBs criticized the proposal this week.
Bank of America CFO Alastair Borthwick expressed concern that the rule could lead to double counting of risk-weighted assets, which could push some banks to restrict lending.
JPMorgan Chase CEO Jamie Dimon, meanwhile, bemoaned what he saw as a lack of transparency in the proposal.
“Do [regulators] want banks ever to be investable again?” Dimon said. “They’re going to do what they want anyway. That’s all that’s going to happen.”
The six trade groups are seeking a new 120-day comment period to accompany an amended capital-requirements proposal.
“Because of … critical procedural deficiencies … neither we nor other commenters are able to fully and properly comment on the proposal at this time,” the trade groups wrote. “This is a rule of sweeping impact and it is not only essential for our members, but also in the national interest, that the new requirements be adopted only after the public has a meaningful opportunity to scrutinize both the proposal and the underlying rationale.”
