Basel proposal lacks publicly available data and analysis required by law

Washington, D.C. – The banking agencies’ Basel proposed rule violates the Administrative Procedure Act by relying on data and analyses that the agencies have not made available to the public, the Bank Policy Institute, the American Bankers Association, the Financial Services Forum, the Institute of International Bankers, the Securities Industry and Financial Markets Association and the U.S. Chamber of Commerce wrote in a letter today. In addition to omitting necessary information from the proposed rule, the agencies have also announced that they plan to collect additional data which they will use to calibrate the final rule — a move that also fails to comply with the law because the public would be denied the ability to review the data used in the rulemaking. The trade associations called on the agencies to remedy these violations of the law by publicly disclosing any and all evidence and analyses the agencies relied on or plan to rely upon — and then re-proposing the rule with a new 120-day comment period.

What we are saying: “The agencies cannot fill in the blanks in the final rule. Instead, to the extent the agencies intend to collect and analyze further data on which to base some or all of their rulemaking in this area, they must suspend the current open rulemaking, complete any data collection and analysis necessary to support their crafting and calibration of the rule, re-propose the rule in light of the additional analyses and data and make that information available to the public and then allow commenters an opportunity to respond.  Any other approach would violate the agencies’ duty to identify and make available for public review and comment the technical studies and data on which any rule is based,” the trade association wrote in their letter.

Legal requirements:  The Proposed Rule violates basic legal obligations of the APA.  When proposing a rule, agencies must identify and make available all data and analysis the agencies used to develop the proposal so that the public has a meaningful opportunity to consider and respond to the agencies’ rationale through the public comment process.  The agencies have not done so here.

Deficiencies in the proposed rule: The letter provides multiple examples where the proposed rule relies on data, analysis, and methodologies that have been withheld from the public view.  It also notes the use of impermissibly vague references to “supervisory experience” — in lieu of specific data or analysis — to justify many elements of the proposal.  Furthermore, the letter provides examples of instances in the rule where the agencies simply assert a proposition with no citation, evidence or analysis to back it up whatsoever.  These omissions deprive the public of a meaningful opportunity to consider and comment on the validity and prudence of the proposal. The agencies are obligated under the law to remedy these legal deficiencies.

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About Bank Policy Institute

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

About the American Bankers Association

The American Bankers Association is the voice of the nation’s $23.5 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2.1 million people, safeguard $18.6 trillion in deposits and extend $12.3 trillion in loans.

About the Financial Services Forum

The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.

About the Institute of International Bankers

The Institute of International Bankers (IIB) represents internationally headquartered financial institutions from over thirty-five countries around the world doing business in the United States. Its members consist principally of international banks that conduct U.S. operations through branches and agencies, bank subsidiaries, and broker-dealer subsidiaries. The mission of the IIB is to help resolve the many special legislative, regulatory, and tax issues confronting internationally headquartered financial institutions that engage in banking, securities, and/or insurance activities in the United States.

About Securities Industry and Financial Markets Association

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org