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Will They Walk the Walk?

By: Bill Poquette

Tiered regulation, one-size-does-not-fit-all regulation, call it what you will, but top federal regulators are talking about it more frequently after hearing about it more and more from community bankers and their lobbying groups. The concept was prominently featured last month at “Community Banking in the 21st Century,” a conference hosted by the Federal Reserve and the Conference of State Bank Supervisors at the St. Louis Fed.

Welcoming remarks from Fed Chairman Ben Bernanke set the tone. “As battle-scarred survivors of a financial crisis and deep recession, community bankers today confront a frustratingly slow recovery, stiff competition from larger banks and other financial institutions, and the responsibility of complying with new and existing regulations,” he said. “My colleagues at the Federal Reserve and I understand these concerns, and we are committed to crafting supervisory policies and regulations that are appropriately scaled to banks’ size and complexity.”

Federal Reserve Gov. Jerome H. Powell followed that up by noting that the Dodd-Frank Act has spawned a variety of new regulatory initiatives that add to the already-substantial regulatory burden faced by community banks. “Which regulations — whether new or existing — impose the greatest regulatory burden compared to their benefits?” he wondered. “Can regulatory agencies modify or provide exemptions to these regulations so as to make life a bit easier and more profitable for community banks, without adversely affecting bank safety and soundness or financial stability?”

A community banker on the program, Dorothy A. Savarese, president and CEO of The Cape Cod Five Cents Savings Bank in Massachusetts, offered some suggestions. The challenge to policymakers and regulators, she advised, is to step back and ask:

This welcome discussion may be arriving just in the proverbial nick of time, for data compiled by compliance and technology professionals at Continuity Control for its Q3 Banking Compliance lndex shows no sign of regulatory relief for the remainder of 2013 and a substantial increase in enforcement actions since last quarter, up 31 percent.

“Community banks are facing increased regulatory demands while, at the same time, regulators are demonstrating a new focus on beefing up enforcement, creating one of toughest regulatory environments we’ve seen in 25 years,” said Pam Perdue, chief compliance strategist at Continuity Control and a former federal examiner.

If the regulators walk the walk after talking the talk, maybe the trend can be slowed or reversed. It would be heartening if we didn’t hear this lament so often from community bankers: “It isn’t fun anymore.”

Bill Poquette is editor-in-chief of BankNews.

Copyright (c) November 2013 by BankNews Media