November 28, 2012 - Invictus Consulting Group LLC says that while the now delayed Basel III capital rules have raised wide concern among community banks, based on its studies and consultations with clients and regulators, implementation is inevitable but that stress testing can provide them with the upper hand in dealing with its impact.

"Importation of Basel III into the US banking system and its proposed application to community banks will be a travesty," declared Kamal Mustafa, Invictus CEO and former head of Citicorp's M&A practice. "It's absolutely the wrong tool. Its structure and guidelines completely fail to take in to account the unique characteristics of the US community banking market. But make no mistake, in one shape or another – it is coming."

Mr. Mustafa emphasized that Basel III's intent of ensuring safe, well-capitalized banks that are capable of surviving an unanticipated "Black Swan" event will remain a regulatory and fiduciary requirement for banks big and small. "Basel III has its roots in stress testing," he said. "All the ratios in its asset quality, concentration, and liquidity of funding criteria are based on severely adverse scenarios."

Mr. Mustafa is encouraging banks to attack Basel III by using stress testing to prove that they are adequately capitalized. "In doing so, they will adhere to the first principles of Basel III, and will gain a powerful tool for strategic planning when facing regulators, investors, corporate treasurers and D&O insurers," he explained.

Invictus has detailed its position in a new report, "Basel III Delayed: US Community Banks Should Seize the Initiative," which was developed by the firm's staff in New York City and London after extensive review of the proposed regulations.