Last week about 60 Indiana bankers, guests, associate members and staff journeyed to our nation’s capitol for the IBA Annual Washington Trip. Our time was well spent discussing a variety of banking issues with regulators and the Indiana congressional delegation. Upon arrival we were briefed by representatives of the American Bankers Association, the Conference of State Bank Supervisors (CSBS), and the Independent Community Bankers of America, after which we called upon top-level management of the Federal Deposit Insurance Corp. (FDIC), Bureau of Consumer Financial Protection, Office of the Comptroller of the Currency and the Federal Reserve Board. Interestingly, there appears to be renewed interest in protecting the community banking model that is unique to the United States. Many of the regulators we met with in DC referred to the prior week’s community banking conference, held at the St. Louis Federal Reserve Bank and co-hosted by the Fed and CSBS. At that event, research papers were submitted by academics, who discussed many issues facing community banks. Additionally, one year ago, the FDIC held meetings across the country that focused on community bank issues. It seems that those FDIC meetings from one year ago, combined with the recent Fed/CSBS meetings, have piqued interest in community bank issues. The result, gleaned from our discussions with regulators, was a heightened awareness of the flood of regulations that have cascaded down on all banks, particularly on community banks. It was refreshing to hear concern and to see interest in preserving the community bank structure.
The second day of our DC trip, we spent most of our time calling on the U.S. senators and representatives from Indiana. The backdrop for these calls was unique this year, with the government shutdown and the impending potential for a default on our obligations if the debt ceiling is not raised. The senators and representatives clearly understood the gravity of the situation and were eager to hear our thoughts on these issues. In nearly every office, we met directly with the senators and representatives. Often on these Washington trip calls, we meet with the legislative assistants who work on banking issues, but not this time. Even our U.S. legislators seemed to have heard the message about the regulatory burden on community banks and showed a new interest in helping to preserve our unique local financial system.
We asked them to sign onto companion bills in the Senate and House that offer some regulatory relief for community banks. These so-called CLEAR Relief Act bills* seem to be attracting interest from both Chambers. They differ slightly, but essentially both would:
- Exempt banks of less than $10 billion in assets from Qualified Mortgage rules for loans held in portfolio;
- Exempt banks of less than $10 billion in assets from escrowing rules;
- Exempt loans of less than $250,000 from independent appraisal requirements;
- Exempt banks of less than $10 billion from Sarbanes-Oxley Act rules from section 404 (b) disclosure mandates.
We also discussed the potential for government-sponsored entity housing reform and urged our legislators to bear in mind that the Federal Home Loan Bank System worked exactly as designed during the financial crisis, and that it is important that it not be harmed. While we are supportive of the secondary market becoming more private than public, there is still a role for public support to assure that all mortgage originators, regardless of volume, have equal access to pricing.
Finally we expressed concern about competing with credit unions and the Farm Credit System, both of which benefit from significant federal tax subsidies not enjoyed by banks. This, too, is a community bank issue, in that community banks have about 10 percent of insured deposits, while credit unions have about 8 percent.
All in all, it was a good week. Thank you to our bankers who took the time and spent their own money to go on this trip on behalf of all banks in the industry. We appreciate and recognize their leadership!
*The Community Lending Enhancement and Regulatory (CLEAR) Relief Act.