Magazine article American Banker

Small Banks Fight for Regulators' Attention: Weekly Wrap

Magazine article American Banker

Small Banks Fight for Regulators' Attention: Weekly Wrap

Article excerpt

Forget About Size: The best way to give deserving banks regulatory relief without walking back necessary aspects of Dodd-Frank is to ease rules for institutions that keep their businesses simple, according to Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig. That means staying away from most derivatives and maintaining an equity-to-assets ratio of at least 10%, among other suggested qualifications. A lot of small and regional banks would qualify for regulatory relief under this plan, but bigger banks that avoided attempts to merge investment and commercial banking would also be eligible. Readers were generally supportive of Hoenig's plan, although "countrybanker" added that big banks would likely succeed in shutting it down. "The 'too big to fail' banks do not want to be on an island by themselves," he writes. "They need the goodwill of community banks to hide behind." Meanwhile, Boston University finance professor Edward Kane added several additional proposals aimed at fixing TBTF. "The fundamental remedy is to establish in law that megabank managers owe fiduciary duties directly to taxpayers," he writes. "The way it is now, managers defend their actions by claiming that they have a formal duty to maximize value for shareholders. But if they are 'too big to fail,' that norm actually entails a duty to steal value from taxpayers."

Small Banks Stay in the Picture: Congress shouldn't get so focused on dealing with big banks that they neglect to help out their struggling, smaller counterparts, according to industry expert Richard J. Parsons. "Every day, community bank presidents are forced to decide whether to devote limited resources to growing the bank -- and thus the nation's economy -- or meeting the escalating regulatory and compliance demands designed and signed off by Washington lawmakers," he writes. Commenter "ahump" agreed, criticizing politicians for appearing unsympathetic to the plight of community banks. But reader Ed Walker argued that community banks have themselves to blame for siding with big banks while Dodd-Frank was being written rather than fighting for their own interests. "Who is on their side now?" he asks. …

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