Lawmakers Likely to Pursue Piecemeal Approach to Regulatory Relief

WASHINGTON — Community bankers may have a long wish list of legislative changes for Congress to make, but it is unlikely lawmakers will take up a comprehensive bill addressing those issues anytime soon.

Despite the handful of regulatory relief bills pending on Capitol Hill right now, panelists at American Banker's Regulatory Symposium said on Monday they were not optimistic that a major bill could pass this session.

"We may be in an atmosphere now where we simply have to deal with legislation piece-by-piece, one bill at a time, as opposed to a large bill," said James Ballentine, chief lobbyist for the American Bankers Association. "Because again, when large bills come before Congress, they run for the doors and they don't want to deal with those."

Ballentine said the association and others in the industry should continue to push for piecemeal reforms on a host of issues, including a delay of the Consumer Financial Protection Bureau's ability-to-pay rule, changes to the bank examinations process, repeal of an annual privacy notice requirement and other issues, in the hopes of grabbing lawmakers' attention.

For example, Ballentine pointed to the long months he spent working towards passage of a law finally approved by Congress in December that removed a requirement for physical fee disclosure placards at ATMs.

"The placard bill is something that I worked on for probably a year and a half, not because I was so interested in removing the placards from the ATMs, but because that's how long it takes to get things through," Ballentine said. "This is not something that bankers were marching to the hills saying, we must get the placard off. This is one of the many things to say, let's get something moving in the hopes of getting their attention."

Mark Kaufman, commissioner of the Maryland Division of Financial Regulation, emphasized the difficulty of getting industry consensus on some of the most pressing banking issues.

"The consensus that tends to form around particular items … may be broad, but [it is] not necessarily deeply impactful," Kaufman said. "I'm not sure that if we repeal the privacy notice it's going to change the return on assets for the community banking system."

Panelists also underscored that, while some issues do need to be addressed by Congress, others remain in the hands of the regulators to solve.

"For the most part, every community bank is very concerned about how they're going to make their returns that are going to satisfy investors within the risk parameters that are going to satisfy the regulators — it's a very delicate balance," said Anita Gentle Newcomb, president and managing director of A.G. Newcomb & Co.

Newcomb explained, for example, how fear of the regulatory response has kept some banks from beginning to offer more construction loans to homebuilders.

"For the most part community banks are scared to death of doing construction lending because of the regulators," she said. "As a strategist we would say, here's an opportunity in your market that everyone else is saying, no, no, we don't want to touch that because of what the regulators might say, that you might want to consider pursuing. It's not just legislation, I think it's also just the mindset of the regulators."

Sometimes differing priorities for the regulators can influence Congress, Ballentine said. "There are a number of issues that [the] ABA would like to pursue and have pursued, and the regulatory bodies would speak to members of Congress and say, no, not an important issue," he said.