Magazine article Independent Banker

From the Top

Magazine article Independent Banker

From the Top

Article excerpt

Recognizing Reg Burden

Rule by rule, community banks for years have been shouldering an ever-growing weight of complex, costly, time-consuming regulation. Today, community banks like mine are bowing under the strain. New rules on corporate governance, antimoney laundering, consumer privacy, and the updates, changes and new interpretations on nearly everything else, seem to have no end in sight.

While each regulation may not have a major impact in and of itself, the cumulative effect steadily takes a toll. Regulations are continually added, or repeatedly modified, but rarely do they go away. We're all nearly at the breaking point.

ICBA has long, and loudly, sounded the alarm about regulatory overkill, which siphons valuable resources away from com- munity lending, the lifeblood of small business- es and local economies. Thankfully, more and more policymakers are hearing and understanding the seriousness of the message. The ICBA, with your help, is making progress. However, one side of the problem deserves more attention: The burden on community banks is not only unnecessarily heavy, it's unfairly disproportionate. This is true when it comes to examination and supervision as much as daily compliance with regulation.

Now comes Dr. Gary Stern, president of the Federal Reserve Bank of Minneapolis, who forcefully makes this same point about proportionate bank supervision. In the June issue of The Region, a publication of the Minneapolis Fed, Stern argues that supervision should focus on large systemic-risk banks.

He wrote: "Given that the prevention of systemic risk is one of the primary justifications for bank regulation and supervision, policymakers should ensure that resources are allocated disproportionately to those banks that raise this threat. Because there are many more small banks than large banks, supervisors end up using the bulk of their resources to supervise banks that no one could claim pose a systemic threat. …

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