Jeremiah Norton, one of the newest directors at the Federal Deposit Insurance Corp. (FDIC), warned of more profit squeezing and regulatory "headwinds" during his first public speech since joining the agency.

"We have revenue challenges, expense-line challenges," he said Wednesday at an Exchequer Club luncheon. "I'm not commenting on any particular regulation but it is a challenging headwind nonetheless. That challenge is really there for all sizes of banks."

Norton, who joined the FDIC in April, said that he preferred regulating based on risk profiles. "You can have [a midsize institution] with a very low-risk business model and then you can have a smaller institution with an aggressive lending" model, he said.

Norton faced questions about the costs of implementing Basel III and living wills. Norton said he had strong opinions on capital requirements but he was hesitant to agree with attendees who were concerned that the costs of living-will requirements would exceed returns.

"It's very early to make a conclusion," he said. "If the government doesn't understand or get the information they need, then the government should ask for it."

Norton and Hoenig were the lone FDIC directors to voice concerns about three proposals for the Basel III capital accord at a June meeting. Norton on Wednesday was unwilling to back a two-year delay of implementation.

"I'm not advocating a delay for Basel III," he said. "I think all things being equal, the trajectory for banks is okay. "When I talk about regulatory headwinds, that's not to suggest we go easy on capital levels."

Norton said Basel implementation is a "real issue" for small banks. "Should we be thinking about a system that works better for smaller banks that doesn't give up on capital being important?" he said. "We will see what happens after the comment process. That is something we will be looking at very carefully."

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