In a letter to the regulators, Lawsky said that the proposed stringent capital rule, meant for banks to salvage them from any unexpected financial crisis, will be an undue burden, as reported by Reuters.
Suitable for big banks, the regulation will only paralyze the operations of small banks, as they have to reserve the required capital to comply with the rule, which could be used in mainstream banking operation.
"Most community and regional banks did not engage in the risky behaviors that led to the financial crisis, and yet … they will be affected disproportionately by the increased complexity," Lawsky added.
Under the proposed rule, the banks will have to accumulate approximately three times more basic capital than existing Basel I rules, while the larger lenders will have to reserve even more, which will be commensurate to the riskiness of banks’ assets.
The rule is expected to be being implemented from January 2013 and will be phased in over six years until 2019, when it fully comes into force.
