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ABA to Congress: It's Time to Move From Good Intentions to Tangible Results for Community Banks


April 17 - The American Bankers Association has testified on the critical steps that are needed to reduce community banks’ regulatory burden and assure our country has a healthy and vibrant community banking sector in the future.

Kenneth Burgess, chairman of FirstCapital Bank of Texas, testified on behalf of ABA before the House Subcommittee on Financial Institutions and Consumer Credit. FirstCapital is a $713 million bank serving Midland, Amarillo and Lubbock, Texas.

In his testimony, Burgess said that it’s time to move from good intentions to substantive changes that will have tangible results for community banks. He noted that recent actions taken by regulators on capital standards and mortgage lending can have unintended consequences that slow economic growth.

“Just when regulators want to see banks grow, they raised capital standards and now are proposing Basel III standards that will surely force community banks to reduce lending,” Burgess said. “Just when the housing market needs mortgage loans, new rules are imposing costs so high that many community banks will likely scale back their mortgage operations. These concerns may even force my bank and others like it out of mortgage lending altogether.”

Burgess praised the recently passed ATM Placard Bill for helping reduce community banks’ regulatory burden, and applauded the efforts of Rep. Luetkemeyer, R-Mo., and members of the subcommittee in moving the Eliminate Privacy Notification Act through the House. But Burgess testified that more can and should be done relating to bank examinations, capital requirements, mortgage rules and municipal adviser registration requirements.

“We need an exam process that provides consistent, timely exam reports, as well an appeals process free from the threat of retaliation,” he said, expressing support for H.R. 1553 sponsored by Chairman Capito, R-W.Va., and Rep. Maloney, D-N.Y. “In addition, Basel III should be reformed so that capital rules enhance, not inhibit the role of community banks. Current proposals would introduce significant volatility into bank capital levels and force many banks to change their core business model due to unfair risk weightings.”

Burgess concluded by calling for simpler mortgage rules that encourage banks to make loans.

“New mortgage rules are creating severe legal risks, diminishing the loans we can offer so that fewer people will be able to get loans,” Burgess said. “The potential for even higher legal risks in the future will likely force many community banks to exit mortgage and retail lending altogether.”