Florida bankers seek liquidity standards relief
By Scott Blake
The Florida Bankers Association is touting an agenda that begins and ends with protecting its members' financial interests.
Alex Sanchez, the group's president, said two issues at the forefront are seeking relief from the Basel III capital and liquidity standards set to take effect next year and getting large credit unions to pay corporate income taxes like banks do to level competitive business conditions.
Is that too much to ask?
No, Mr. Sanchez argues, because the financial burdens of Basel III may be too much for smaller community banks to bear.
In addition, he said, it's time that large credit unions pay their fair share in taxes in an era of record government deficits because, although the credit unions are classified as nonprofits, they essentially operate like banks and are capable of making money.
"They walk like a bank. They talk like a bank. They should be taxed like a bank," Mr. Sanchez told Miami Today.
Another big concern for the association, he said, is the expiration of the federal Transaction Account Guarantee, or TAG, program at the end of the year. The accounts typically are used by businesses to meet payroll and operation expenses.
"Because the global banking system and the economic recovery remain fragile," the Florida Bankers stated in a position paper on the issue, "expiration of full insurance coverage for transaction accounts carries the risk of abrupt dislocation of funds and other unintended consequences for the financial sector."
The Florida Bankers aren't the only banking group lobbying on those issues. However, those on the other side can make an argument as well.
The TAG program, for instance, was only a temporary measure put into place when the financial crisis was in full swing in 2008, and banks have known when it would end.
Run by the Federal Deposit Insurance Corp., the program provides unlimited insurance for $1.4 trillion in noninterest-bearing transaction accounts, the kind that small companies generally use for their payrolls.
During the financial crisis, the idea was to encourage owners of small businesses to keep their deposits at community banks.
With the program set to expire, community banks fear those businesses will shift billions in deposits to large banks, which are often viewed as safer because of their size. If that happens, small banks say, it will hurt their ability to lend.
Regarding the credit union tax issue — something that banks have long challenged, representatives of credit unions have called efforts to end the tax-exempt status of credit unions "blatant mischaracterizing information" to serve an "anti-consumer agenda."
Credit unions argue that their profits are directed back to members in the form of better rates on savings and loans, in addition to lower and fewer fees on other services.
Mr. Sanchez, on the other hand, said his association only wants changes in the tax status of large credit unions, such as those with deposits of at least $500 million, while the large majority of credit unions would maintain tax-exempt status.
Allowing big credit unions to avoid paying federal and state corporate income taxes is akin to "corporate welfare," he added.
Meanwhile, Mr. Sanchez said, the upcoming Basel III requirements — scheduled to be phased in over a 10-year period beginning in 2013 — will especially put smaller banks under duress.
The new standards were intended to strengthen the regulation, supervision and risk management of the banking sector. Banks will be required to hold more capital and higher quality of capital than under the current Basel II rules. The new rules also introduce new leverage and liquidity ratios.
Consultants that have said weaker banks will be "crowded out" of the industry under the new requirements but the risk of another systemic banking crisis will be reduced.
"The proposed rules will go far deeper than a simple impact on profitability and return on equity," consulting firm KPMG wrote. "The requirements will have a fundamental impact on business models and the shape of the business done by banks.
"Some commentators fear — and other welcome — the potential to return to a regime similar to the one that operated a century ago," the study added, "in which there was limited competition, much less maturity transformation, and much less innovation in financial services."
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