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CSBS Renews Calls for Extension of the TAG Program
Aug 6 - In a letter to leadership of the U.S. Senate and U.S House of Representatives, John W. Ryan, president and CEO of the Conference of State Bank Supervisors, renewed calls for the extension of the Transaction Account Guarantee program for two years.
The letter, addressed to Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY), Speaker of the House John Boehner (R-OH), and House Minority Leader Nancy Pelosi (D-CA), also encouraged Congress to call on the FDIC to develop a transition plan allowing institutions to withdraw gradually from the program as needed, to avoid an abrupt end date that could create liquidity concerns for some institutions.
“While the banking industry is showing signs of recovery, it continues to face significant challenges,” Ryan wrote. “Smaller community based institutions, in particular, continue to operate in a competitive environment that seems tilted towards larger institutions, a situation exacerbated by uncertainty in the economic outlooks. All of these factors could have an impact on industry liquidity and stability, two elements that the TAG program has supported.”
The letter from Ryan is the latest effort by CSBS to advocate for the extension of the TAG program beyond the scheduled Dec. 31, 2012, expiration date. In March, an opinion piece by John P. Ducrest, commissioner of the Louisiana Office of Financial Institutions and then-chairman of CSBS, was published in American Banker.
The TAG program has proven particularly vital to smaller, community based institutions as the nation’s largest financial firms continue to derive advantages based on their status as “too big to fail” institutions.
In his opinion piece, Commissioner Ducrest, who currently serves as immediate past chairman of CSBS, acknowledged provisions of the Dodd-Frank Act seek to address the inequity between community banks and firms deemed “too big to fail” by implementing enhanced prudential standards and creating a resolution regime for the biggest firms.
“The federal regulators are doing a commendable job of writing and implementing these regulations, but much work remains,” wrote Ducrest. “Until the mandates of the Dodd-Frank Act are fully implemented and a comprehensive resolution process exists for the biggest banks, we will have failed to restore equality to the financial system. As long as there is a widespread perception that ‘too big to fail’ still exists, programs like TAG that provide some equity in the bank industry must remain in place.”