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July 3, 2013 – The Federal Reserve Board on Tuesday finalized the Basel III rule, creating stronger capital requirements for big banks while providing some regulatory relief from its proposal for regional and small banks.

The final Basel III rule does not apply to credit unions. NCUA Director of Examination and Insurance Larry Fazio, quoted by the Credit Union Times in February, said credit unions would not be held to the Basel III requirements but could end up with a version of them. He called it "Basel lite," which would be a simplified Basel framework. NAFCU has weighed in with both the Fed and NCUA to point out these standards aren't suitable for not-for-profit, cooperative financial institutions.

Basel III is modeled on risk-based capital requirements, which credit unions currently don't have. NAFCU is seeking a modernized capital system for credit unions in connection with its five-point plan for comprehensive regulatory relief. H.R. 2572, the "Regulatory Relief for Credit Unions Act of 2013," introduced recently by Rep. Gary Miller, R-Calif., includes a risk-based capital proposal supported by the credit union industry.

The Federal Reserve coordinated the final Basel III rule with FDIC and the Office of the Comptroller of the Currency. The FDIC will consider the matter as an interim final rule July 9. The OCC expects to review and consider the matter as a final rule by that date as well.

The phase-in period for smaller, less-complex banking organizations will not begin until January 2015. The phase-in period for larger institutions begins in January 2014.