In a few weeks, we all get to enjoy when time "falls back" one hour (or do we?).
But, for bankers, as we near the end of the year, it will be time for them to roll forward to the next increase in minimum capital requirements. As we complete our 2018 operating plans, we need to incorporate this increase into our planning. On January 1, 2018, bankers will implement the third step in the four year phase-in of the new capital regulations with another 62.5 basis point increase in minimum capital ratios:
Now 62.5 basis points may not sound large, but let's put this into perspective. For Community Banks with total assets of less than $1 billion - there are over 5,000 of this size, the increased capital requirements will be approximately $550 million (62.5 basis points times total risk-weighted assets of approximately $88 billion). And if this is applied to all Community Banks with total assets of less than $10 billion - over 5,600 banks, the increased capital requirements will be approximately $13.8 billion (62.5 basis points times total risk-weighted assets of approximately $2.2 trillion).
This change will not necessarily require Community Banks to raise additional capital, but the effect of the increase will be to reduce the amount of "excess" capital that they may have been holding for future loan and deposit growth, additional branching, acquisitions or shareholder dividends. So there is an impact that needs to be incorporated both into your 2018 operating plan and into your longer range Strategic Plan and Capital Plan.
And remember - this happens one more time in 2019.
So Community Bankers, enjoy that extra hour of sleep in two weeks and get rested for your steps to finalize your 2018 operating plan.
Much continued success to all Community Bankers!