ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release April 17, 2001 #01-29
E-mail: [email protected]

ACB URGES EXEMPTIONS FROM MERCHANT BANKING CAPITAL CHARGES

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Editors, Reporters:

America’s Community Bankers has urged the three federal banking agencies to exempt several longstanding activities engaged in by community banks from their proposed capital rule on equity investments in nonfinancial companies. ACB said a supervisory approach would be sufficient.

ACB said the proposal “represents an unnecessary imposition of capital requirements on investment activities long considered part of the business of banking.” ACB said it does not believe the Gramm-Leach-Bliley Act’s merchant banking provision requires a comprehensive capital regulation for all nonfinancial equity investments.

Specifically, ACB urged exemption of investments made by small business investment companies, made by banks under state authority and regulated by the FDIC, or made under long established investment authorities.

Even though the proposal would provide a safe harbor from capital charges of SBIC investments up to 15 percent of Tier 1 capital, the investments would count against a banking organization’s aggregate total of investments. ACB said this could have a negative impact on an important source of capital for small businesses.
State-chartered banks have been permitted to make limited amounts of equity investments for more than 50 years. The investments are regulated by the FDIC, which sets capital requirements. The proposal would grandfather investments made under section 24(f) of the FDI Act, but other investments made under the statute would be subject to the proposal’s 8-25 percent capital charges.
The proposal also would add a capital charge for bank holding company equity investments of up to 5 percent in other companies.

ACB’s Comment Letter is ATTACHED.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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