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Mark Miller Discusses Impact of New Capital Rules Under Basel III in Nashville Business Journal


New capital rules for banks that went into effect January 1 apply to everybody, even smaller community banks. Banks with less than $250 billion in assets will have to meet higher capital standards under Basel III, with a few wrinkles. Under those parameters, these new rules will apply to all banks based in Nashville and those doing business here. Banks will now have to maintain a minimum common equity ratio (common equity to risk-weighted assets) of 4.5 percent to be considered "adequately" capitalized. And over the next four years, banks will need to meet a new capital buffer for all their capital ratios. In this Nashville Business Journal article, Mark Miller discusses how these new rules will impact local Nashville banks.

Mr. Miller says he doesn't see the new rules causing local banks to rush out and add more capital. He said the new rules may mean banks hold on to more retained earnings, rather than adding them to shareholder dividends.

"It's not instant," he said of the new capital buffer. "So that's why you don't see banks out there racing to get more capital. For a bank that is healthy, these numbers are probably already attained. It's the higher benchmark that they have to meet, so you may see banks retain more [earnings] to build more capital."

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