New Capital Rules For Community Banks

While small banks avoided some of the dreaded brunt of Basel III, this summer's capital changes require all banks to reconsider their capital positions and may drive some banks to raise capital.  Fortunately, the final rules exempt community banks from many of the more onerous proposals.  However, many of the changes do apply to community banks, and all banks must take stock of their capital positions carefully to determine whether proactive steps are needed before the rules take effect.

Here are some important highlights community bankers should know about the final rules:

Capital Treatment of Residential Mortgages.  If impossibly complicated risk weighting for residential mortgage loans caused sleepless nights, you can rest easy.  The initial Basel III proposals threatened a complex calculation of capital risk weighting for one to four family residential mortgage loans that would have required a loan-by-loan weighting based upon a complicated matrix of