Dec 11 - The Conference of State Bank Supervisors has issued a white paper discussing the importance of designing a regulatory framework that appropriately supervises and supports community banks. In the white paper, titled “An Incremental Approach to Financial Regulation,” CSBS outlines actionable recommendations federal banking regulators and Congress can use to improve the community banking sector’s ability to safely and soundly meet the needs of local communities. These actions are vital to ensure the community bank business model, which underpins many local economies, is allowed to flourish.
“Federal lawmakers and regulators have demonstrated the ability to distinguish between banks’ business models and tailor supervisory and regulatory expectations,” CSBS wrote. “By recognizing that Congress and federal regulatory agencies have the ability to design statutes and regulations to address risks inherent in large, complex organizations without crippling smaller, less sophisticated organizations, one can begin to envision a diverse and vibrant community banking sector that will continue to contribute to the economic vitality of the United States for decades to come.”
CSBS recommends the following actions by Congress and federal regulators that promote a diverse U.S. financial system, and support community banks and the local economies they serve:
CSBS acknowledges efforts by federal policymakers to adjust legislation and regulations that provide meaningful relief to community banks, but warns that recent efforts to build a regulatory framework exclusively focused on limiting the risks of large complex institutions imperils community banks.
“Ill-designed regulations should never be the reason a small institution sells or self-liquidates, and it is now time for policymakers to design an appropriate regulatory model for community banks,” CSBS wrote.
Click here for the white paper.