The American Bankers Association on Wednesday urged conferees hashing out the regulatory reform bill to avoid changing capital rules because of possible unintended harm to the industry.
In a letter to the top leaders of the House and Senate banking committees, the trade group warned that a number of institutions would face immediate failure if trust-preferred securities were no longer counted as Tier 1 capital.
"These are institutions that would not otherwise fail and that relied in perfectly good faith on the existing capital rules," Edward Yingling, ABA's president and chief executive, wrote. "Their failure would be a disaster for their employees, their stockholders and their communities. Many other banks will be driven to sell purely because of this section."
Sen. Susan Collins, R-Maine, has continued to defend her provision, which would establish minimum capital standards and ban trust-preferreds from being used as Tier 1 capital.