THE HARVARD STATE B A N K
THE HARVARD STATE BANK
35 N . AYER STREET HARVARD, IL 60033 TEL: 815.943.4400 FAX: 815.943.4759
HEBRON COMMUNITY FINANCIAL CENTER
COMMUNITY BANK OF ROCKFORD
COMMUNITY BANK OF OREGON
9605 MAIN STREET HEBRON, IL 60034 TEL: 815.648,2481 FAX: 815.648.4644
2470 EASTROCK DRIVE ROCKFORD, 1L 61108 TEL: 815.397.3111 FAX:815-397.3217
101 S. 4 T H STREET OREGON, [L 61061 TEL: 815.732.3111 FAX: 815.732.3115
September 2 8 , 2012
Jennifer J . J o h n s o n , Secretary Board of G o v e r n o r s of the Federal Reserve System 20th S t r e e t and Constitution A v e n u e , NW W a s h i n g t o n , DC 20551 Dear M s . Johnson: My name is Roger L . L e h m a n n , P r e s i d e n t / C E O of The Harvard H a r v a r d , I l l i n o i s . Our primary r e g u l a t o r is the F D I C .
State
Bank,
I am w r i t i n g to you today to express my concern relative to the capital regulation that is going to be put in effect as of January 1, 2 0 1 3 . In m y o p i n i o n , the Basel III if indeed covers the small c o m m u n i t y banks will g r e a t l y adversely affect them and their ability to m a k e loans to their c u s t o m e r s . I believe one example of this is that for m a n y years the r e g u l a t o r s have encouraged banks to m i n i m i z e their interest rate risk by having three and five year balloons N o w , with Basel III, this will a d v e r s e l y affect our risk rated c a p i t a l . Our Bank has about $240 million in assets of which a p p r o x i m a t e l y $150 million are loans to small businesses with our largest c o n c e n t r a t i o n being our one to four families which c o n s t i t u t e s about 30% of our lending p o r t f o l i o . In addition to this we m a k e , as I s a i d , loans to small businessmen and farmers in our geographic area. W h a t I have been able to d e t e r m i n e so f a r , in looking at the Basel III r e g u l a t i o n s is that if this covers banks such as o u r s , we will have to stop m a k i n g loans to small businessmen and real estate loans for our capital account under risk based capital will not support it and I assume that this will happen for m o s t of the c o m m u n i t y banks in the United S t a t e s . So t h e r e f o r e , we will end up with 25 large mega-banks in the c o u n t r y as the European model is at this t i m e . This is a real concern of m i n e for who will take care of the small businessmen and the consumers. It is m y understanding that when Basel came out 10 to 15 y e a r s ago, it was for the purpose of standardizing the accounting system for international banks and if a bank in Switzerland was going to make a trade or a contract with a bank in T o k y o , they needed to know w h a t their financial statements stood f o r . In the United S t a t e s , we've had
visit us o n l i n e at w w w . w e b h s b . c o m
Jennifer J. Johnson, Secretary
2
September 28, 2012
FASB regulations for standardizing our financial statements for many y e a r s . So, therefore, if a bank had a contract with another bank in a distant state, the two persons entering the contract could review these financial statements and understand the risks they are taking by entering into these contracts. I do believe there is a place for Basel international banks that do trade across countries. But, I do also believe that we community banks with the FASB accounting that years in the United States.
III in the world for the the globe into different do not need Basel III for has been in place for many
T h e r e f o r e , I request that you reconsider your proposal and limit this to the $10 billion and larger banks as originally planned. Thank you for giving me the opportunity to comment on the proposed new regulation and express my concern that this will be a detriment for the community banks and will have unintended consequences. I look forward to having dialogue with you on this subject. My telephone number is 8 1 5 / 9 4 3 - 4 4 0 0 . My E-mail address is
[email protected]. Thank you from y o u .
RLL/kms
for your
time and c o n s i d e r a t i o n .
I look forward to hearing