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Community bankers emerged victorious Tuesday after regulators made a number of key changes to a final package of Basel III capital rules in an effort to address smaller institutions' concerns. But the biggest banks, in contrast, fared far worse.
July 2 -
Community bankers should continue to bolster lending despite challenges created by compliance with a host of new Dodd-Frank regulations, Federal Reserve Gov. Elizabeth Duke said Tuesday.
February 5
WASHINGTON — Federal Reserve Board Chairman Ben Bernanke said Wednesday that U.S. regulators don't want to harm community bankers still ailing from the financial crisis.
The central banker said five years after the 2008 financial crisis, community banks are "battle-scarred survivors" and are still facing a "frustratingly, slow recovery, stiff competition" from larger banks along with the "responsibility of complying with new and existing regulations."
While observers have said such obstacles, especially complying with regulations, may prove "insurmountable," Bernanke said the Fed is "committed to crafting supervisory policies and regulations that are appropriately scaled to banks' size and complexity."
The Fed has set up a committee in order to hear out the concerns of community bankers when it comes to new regulatory laws. Additionally, the agency has set up a subcommittee specifically to look at the potential effects regulatory and supervisory proposals would have on community banks.
That subcommittee, Bernanke said, has also made it a priority to effectively communicate with community bankers whether new rules and guidance apply to community banks.
"I hope those efforts are helping community bankers avoid spending time trying to understand rules that do not apply to them," said Bernanke, speaking at joint conference between the Fed and the Conference of State Bank Supervisors.
Bernanke, and other top U.S. bank regulators, have repeatedly stressed the importance of community banks to the U.S. financial system.
"The future of community banks is important — to both the economy and the communities they serve," said James Bullard, president of the St. Louis Fed, at the conference.
Regulators have been under immense pressure by community banks and their allies in Congress to ensure that such institutions would not face overly complex rules. As a result, regulators have sought to be as responsive as possible, often providing community bankers with "cheat sheets" to describe how a rule would apply to their institution.
Most recently U.S. regulators offered a series of concessions to community banks for a slate of capital and liquidity rules under Basel III when they released their final rule in June. Smaller-sized institutions feared tougher rules would have curbed their lending and hurt their businesses.
Bankers, by and large, were appreciative of the comments, though they remain skeptical as to how his views will resonate in the field. In particular, there were doubts about Bernanke's comments that community banks " can look beyond credit scores and other model-based metrics to make lending decisions."
"You don't get credit from examiners for" making lending decisions based on borrowers' character, John Franklin, chairman and president of the $142 million-asset 1st Bank in Sidney, Mont. "I like the topics he discussed and the awareness he portrayed. The question is whether changes will be implemented."
Kevin Tetzlaff, president and chief executive of the $892 million-asset First Bank & Trust in Brookings, S.D., agreed.
"I appreciate his comments, but the difficulty today is that we really aren't allowed to go outside the box, from a regulatory perspective, and do the things we did best in the past. My hope is that we can figure out how to use our strengths when there are so many constraints."
