Basel III Threatens Existence Of Many Small Banks That Promote Growth In Local Economies

The banker pressured regulators to justify the increase, saying his experience of 40 years in making such loans yielded a zero default rate. Regulators cut off the banker but other bankers on the call picked up the fourth-generation banker’s sentiment, saying they agreed with him.
They said the new rules could keep them from being able to loan money to small businesses and homeowners. The economic slowdown has added to concerns that the new rules will harm smaller banks.
The banks say they are drivers of growth in smaller communities and the new rules could put an end to such growth.
The rules are designed to match the amount of risk larger banks may take against repayment of a mortgage loan. Smaller banks say such loans are not risky for them because they have long-term personal relationships with the borrowers.
Smaller bankers do not have access to the capital markets so the imposition of the rules could run them out of business and hurt local economies. The fourth-generation banker would like to hold on to his family’s business. If he can’t and an outside investor takes over, priorities that currently favor local borrowers would change.

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