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ICBA: Tiered Regulation Essential to Minimizing Financial, Economic Costs


Feb 4 - The Independent Community Bankers of America recently emphasized to policymakers that the regulatory burden facing community banks has risen sharply in recent years, saying that an astounding 900 new rules and proposed rules affecting the banking industry have been entered into the Federal Register since 2007 alone. To combat the threat of increasingly excessive community bank regulation to the nation’s economy, ICBA is calling on policymakers to carve out community banks from new regulations and expand on the tiered financial regulatory approach that recognizes community banks’ common-sense practices, which have served the nation for more than a century and allowed Main Street America to grow and prosper.
“Community banks face an alphabet soup of regulations, each of which contains hundreds of pages of burdensome rules,” Jeffrey L. Gerhart, ICBA chairman and chairman, president and CEO of Bank of Newman Grove, Neb., said. “From A to Z and beyond, these regulations impose direct costs on community banks, inhibiting them from serving their customers and communities. To help community banks restore our nation’s economic growth, policymakers should build on the tiered approach to financial regulations that distinguishes between community banks and the nation’s largest financial institutions.”
The costs of regulations are significant for community banks, their customers and the economy as a whole. A Federal Reserve study predating the massive influx of banking regulations in recent years cited data estimating that a sampling of the most burdensome regulations amounted to more than 14 percent of community bank operating expenses. Since then, regulatory burdens have only increased. Reforms implemented since the Wall Street financial crisis of 2008-2009 are estimated to create up to 20,000 pages of new rules. Increasing regulations are expected to drive up lending rates, cost 7.5 million jobs and cut gross domestic product by 0.7 per year over the next five years, the Institute of International Finance estimates.
“To alleviate the burden of excessive regulation on the nation’s community banks, ICBA is calling on policymakers to carve out community banks from new regulations while continuing to pursue tiered regulation that distinguishes between community banks and larger and riskier institutions,” Camden R. Fine, president and CEO of ICBA said. “Community banks have little in common with Wall Street firms, megabanks or shadow banking institutions and did not cause the financial crisis or perpetrate abusive consumer practices.”
Regulatory, tax and paperwork requirements impose a disproportionate burden on community banks. Shifting the focus of regulatory resources to the large and complex institutions that caused the financial crisis will help better protect the financial system and the economy while minimizing costly burdens on Main Street institutions.
For more information about community banks and the regulatory burdens they face, visit