ICBA Advocates Alignment of Federal Housing Finance Agency Capital Rule

Independent Community Bankers of America officials said the organization is encouraging the Federal Housing Finance Agency (FHFA) and bank agencies to align capital rules or risk negatively impacting community banks.

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“Without the collaboration of federal regulators to immediately align their capital rules, community banks may soon be forced to realize what are now just unrealized losses – an unfortunate outcome that could unnecessarily jeopardize access to liquidity in a period of economic volatility and uncertainty,” said ICBA President and CEO Rebeca Romero Rainey. “Proper regulatory action can now prevent an unnecessary negative outcome for community banks and the communities they serve.”

ICBA recently forwarded the correspondence to FHFA and other bank agencies. This communication follows an earlier joint letter to FHFA from ICBA, the American Bankers Association and affiliated state banking associations.

“The Independent Community Bankers of America (ICBA) is writing to you to highlight our concerns that a regulatory inconsistency between the Federal Housing Finance Agency (FHFA) and key federal regulators (PFRs) is preventing community banks from otherwise safe and sound to be ready, certain and immediate access to advances from the Federal Home Loan Banks (FHLB),” the ICBA wrote. “Unprecedented government stimulus activity during and in response to the pandemic has led community banks to invest in low-risk US Treasuries – a move rarely criticized as dangerous or unsound.”

Unrealized losses in reliably stable portfolios unnecessarily compromise community banks’ access to liquidity due to the fact that the FHFA and PFR maintain inconsistent rules for community banks’ tangible capital.

Louis R. Hancock