Community Banks Press Congress for Relief

By Lawler, Joseph | Examiner (Washington, D.C.), The, February 6, 2015 | Go to article overview

Community Banks Press Congress for Relief


Lawler, Joseph, Examiner (Washington, D.C.), The


While the politics surrounding big banks could not be more heated, small and community banks are hoping Congress will ease regulations on them in the weeks and months ahead.

"What we're pressing up in the House and Senate is [regulatory] relief morning, noon, and night," said Paul Merski, the head of congressional affairs for the Independent Community Bankers of America, the powerful trade group for community banks. The "number- one priority is rolling back some of the onerous regulations put on community banks over the past several years."

Community banks are defined by the Federal Reserve as banks with less than $10 billion in assets. By the Federal Deposit Insurance Corporation's reckoning, based on traditional relationship banking and limited geographical scope of operations, more than 6,500 community banks are spread across the U.S.

By comparison, JPMorgan Chase alone has more than $2.5 trillion in assets, according to the Fed. But while banks such as JPMorgan, Bank of America and Citigroup may be more powerful in terms of money, the community banks have a more diverse representation in all 50 states and are in the backyards of lawmakers.

A top priority for the community banks is relief from mortgage rules issued in the past few years by the Consumer Financial Protection Bureau and separately by banking regulators. The mortgage rules, intended to prevent consumers and investors from getting ripped off by abusive loans, are onerous for community banks, Merski said. Community banks will be looking for exemptions for loans they keep on their books, rather than sell off as part of securities.

They also want a break from the capital rules imposed on banks in the wake of the crisis. Those rules have caused big banks to double their capital levels, meaning that they are less reliant on loans. The best-case scenario for small bankers would be an outright exemption from the rules for banks with under $50 billion in assets.

Regulators are mostly attuned to the needs of community banks and the fact that regulations to rein in larger banks could be prohibitive for smaller banks with less staff.

Last week, Toney Bland, senior deputy comptroller for Midsize and Community Bank Supervision at the Office of the Comptroller of the Currency, said in a speech that "smaller banks and thrifts don't have the same kind of resources that large institutions can bring to bear on regulatory compliance, and if we can eliminate unnecessary rules and streamline others, we can make it easier for these institutions to serve the economic needs of their communities. …

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