Academic journal article ABA Banking Journal

Three Issues to (Really) Watch

Academic journal article ABA Banking Journal

Three Issues to (Really) Watch

Article excerpt

You should be aware of ABA's osition on three issues that romise to have a great deal to do with our industry's continuing success: CRA reform, regulatory consolidation, and interstate banking.

Community Reinvestment Act Reform

Bankers have not been enthusiastic about the CRA reform proposal that came from the regulators earlier this year. Why are they -- and ABA -- worried that CRA "reform" might be even worse than what we have now? It's just possible that the regulators are asking bankers to trust them a little too much. Specifically:

* We should trust that the $250 million

assets threshold for the streamlined exam won't be lowered (even though community groups are already calling for a lower threshold).

* We should trust that regulators will permit small banks to use the streamlined exam even though (for sound lending reasons) they fall below the required 60% loan-to-deposit ratio.

* We should trust that the market share test for those above $250 million will work out "just fine" even though it pits banker against banker for market share.

* We should trust that disclosure requirements on small business and consumer loans will cause no added regulatory burden for banks and result in no misunderstood data.

* We should trust that community groups will take a low-key, back-seat approach to CRA despite the fact that their involvement hasn't been clarified in the proposal.

After considering all these issues, the ABA Board of Directors decided that we just don't have that much trust!

In fact, the board concluded, perhaps we should start all over again with CRA reform. One alternative would be to allow each bank to develop a CRA program tailored to its individual market. Another would be to stay with the current system, living with the devil you know rather than the one you don't.

The bottom line is that either option offers bankers a better deal than what has been proposed.

Regulatory Agency Consolidation

The agency consolidation question brings up the issue of "trust" all over again. Consolidation of the regulatory agencies is one of the most controversial issues in Washington right now, and everyone has a different idea of what would or wouldn't work.

For our industry it's a high-stakes issue, and ABA purposely took its time weighing the opposing consolidation proposals, listening to the views expressed by our members and seeking a position that reflects a consensus. …

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