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Subchapter S Bank Association

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March 25, 2014

Basel III Capital Rule for Subchapter S Banks

In addition to revisiting the dividend restriction rule contained in the Basel III Capital Conservation Buffer provisions, we encourage the Agencies to support efforts to expand access to capital for Subchapter S banks by supporting an increase of the shareholder limit from 100 to 500 and permitting entities other than natural persons and trusts to hold shares of an S corporation. Finally, we encourage the Agencies to support expansion of capital instruments for Subchapter S banks to include preferred stock.

We believe these issues are of critical importance to one-third of the banks in the United States, 90% of which are under $1 billion in assets and serve as the essential credit back bone of smaller communities and their local businesses throughout the country.

We strongly urge the Agencies to embrace the Subchapter S bank community and undertake a concerted effort to promote their health and ability to raise capital and function as freely as possible in the best interest of their shareholders and communities. This can only be achieved through discussion and policy-making that includes the needs and interests of Subchapter S banks at the outset of the process rather than as a mere afterthought.

Regulator Letter – Sub S Dividend Policy Final

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Subchapter S Bank Association

112 East Pecan St., Suite 2810
San Antonio, TX 78205
Phone: 210-228-9500
Fax: 210-228-0781

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