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Hail to the Voices of Reason
Are community banks gaining clout with regulators and lawmakers? Growing evidence suggests this is indeed the case.
Recently, for instance, at the same Banking Committee hearing where Sen. Elizabeth Warren, D-Mass., skewered top regulators for relying on settlements and consent orders rather than taking any Wall Street banks to trial for their roles in the financial crisis, these same regulators made sure the panel knew the interests of community banks were being weighed in their rulemaking processes.
“As we move forward with Dodd-Frank Act implementation, I have directed my staff to look for ways to minimize potential burden on community institutions, and to organize and explain our rulemaking documents to facilitate community bankers’ understanding of how the rules affect their institutions,” said Comptroller of the Currency Thomas Curry.
Also last month, Reps. Shelley Moore Capito, R-W.Va., chairman of the House Financial Institutions Subcommittee, and panel member Carolyn Maloney, D-N.Y., urged the federal regulators to tailor the final Basel III capital requirements so that they are appropriate for the wide range of institutions that comprise the U.S. financial system.
In the opinion of Federal Reserve Board Gov. Elizabeth A. Duke, community banks have been more successful than they realize following the recent crisis in making the case against “one size fits all” regulation. “I can’t remember a time when I have seen more regulatory proposals drafted that differentiate between banks based on size or complexity,” she said at a University of Georgia bank management and directors conference last month.
The Federal Reserve has formalized its process for considering the unique characteristics of community banks as it crafts regulatory and supervisory policies, she explained. A few years ago, the Fed created a subcommittee that makes recommendations about matters related to community bank supervision and regulation. This subcommittee, which she chairs, reviews all regulatory proposals and supervisory guidance with an eye toward the possible effects on community banks.
“The group is focused on understanding the factors that influence the viability and performance of community banks including, importantly, the effect of regulatory changes and their associated costs and benefits,” she said.
Duke acknowledged that the regulatory changes under way are not without cost to community banks. “But I also know that we at the Federal Reserve are doing our best to avoid adding to regulatory burden wherever possible as we respond to the worst excesses of the financial crisis and make the U.S. financial system more resilient,” she said. “Research is helpful in this effort, but it is also important to maintain an ongoing dialogue with community bankers and to actively solicit comment on regulatory proposals. So I urge you to continue to communicate about the challenges that regulations pose for community banks.”
As the American Bankers Association prepares for its annual Government Relations Summit in Washington, D.C., next month, and state associations hold their “capitol days” to bond with their state legislators, do not doubt that community bankers’ message is being heard.
Incoming Independent Community Bankers of America Chairman William A. “Bill” Loving Jr., president and CEO of Pendleton Community Bank in Franklin, W.Va., when interviewed for the article about him elsewhere in this issue, noted that in testimony on the impact of Basel III recently, “The questions that were directed at the regulators were encouraging and reflective that many in Washington, D.C., understand the issue.”
Bill Poquette is editor-in-chief of BankNews.
Copyright (c) March 2013 by BankNews Media