-
Republicans are working to craft a Dodd-Frank regulatory relief bill this spring, but pushback on cost-benefit analysis mandates could derail the process.
March 4 -
The Senate Banking Committee's first look at regulatory relief for small institutions provided key insights into how the panel is likely to tackle the topic legislatively this year, suggesting it could be a long and contentious debate.
February 10 -
An increased cap would almost certainly lead large institutions, hungry for short-term profits, to take greater risks that they are ill-equipped to handle.
November 27
WASHINGTON The House Financial Services Committee renewed its look at regulatory relief for small financial institutions on Wednesday, pressing bankers and credit union representatives for details about their compliance burdens.
Rep. Jeb Hensarling, R-Texas, chairman of the committee, warned that "time is of the essence" for community banks and credit unions that are struggling with the costs of additional rules under the Dodd-Frank Act and other provisions.
"It is not an exaggeration to say that they are literally withering on the vine," Hensarling said. "We are losing more than one a day and they are not perishing of natural causes. The sheer weight, volume, cost, complexity and uncertainty of federal regulation is a burden that is killing them off."
The chairman added that he would be willing to take up any "legitimate, bipartisan piece of legislation to provide needed regulatory relief to community financial institutions" introduced before the panel.
Lawmakers in both chambers have been working for years to address concerns about the regulatory burden, and it's unclear what kind of deal can be brokered in the GOP-led Congress.
Although Democrats have said they are wary of widespread relief that undermines Dodd-Frank, they have also said they support the need for targeted legislation.
Rep. Maxine Waters, D-Calif., the ranking member on the panel, for example, signaled her support Wednesday for lifting the member business lending cap on credit unions from the current limit of 12.25% of total assets. There have been several efforts in recent years to more than double the cap to 27.5%.
Waters asked Peggy Bosma-LaMascus, president and chief executive of Patriot Federal Credit Union, whether the industry has tried to work out a deal with the banks to get the measure through Congress. Banks have historically opposed raising the cap, arguing that just a small proportion of credit unions would benefit from the change and that it would inject more risk into the financial system.
"Have you worked with the banks so that you could have an effort to support the credit unions being able to increase business lending? A lot of you say we should work together more can the banks and the credit unions come together around something like this?" Waters said.
Bosma-LaMascus, who testified on behalf of the National Association of Federal Credit Unions, did not speak to any specific efforts to work with banks on member business lending, but pointed to other areas where the industries are aligned.
"We have many issues on which we are very much in agreement and in fact, I believe we're all in agreement that if Congress could require realistic and robust cost-benefit analyses of proposed regulations and documentation that we would all be able to give much more targeted feedback, so the result would be smarter regulation," she said, also discussing proposed changes to the six-withdrawal limit under the Federal Reserve's Regulation D for savings and money market accounts.
Adam Levitin, a professor at Georgetown University, argued that problems facing community institutions span beyond Dodd-Frank, noting that consolidation began well before the financial crisis. He suggested that lawmakers should instead focus on restraining the Wall Street banks if they want to level the playing field for smaller banks.
"If this committee really wants to help community financial institutions, the single best thing it could do, would be to pass legislation that would tax or break up the megabanks," he said. "Additional regulatory exemptions for community banks are insufficient to save this industry because no amount of exemptions will sufficiently level the playing field for community banks. Moreover, these exemptions will come at the cost of consumer protection."
Meanwhile, the Senate is also moving forward with regulatory relief efforts. The Banking Committee has held several hearings on the issue, and Sens. Jerry Moran, R-Kan., and Joe Manchin, D-W.Va., reintroduced legislation Wednesday that would give institutions additional recourse for sharing concerns regarding their regulatory exams.
The Exam Fairness Bill would require regulators to provide financial institutions with the information used to make decisions about their exams and would establish an ombudsman at the Federal Financial Institutions Examination Council to field exam complaints. It would also require regulators to formalize certain exam guidance.
"This is a needed step toward improving the federal examination process that would provide regulatory relief to credit unions," said Jim Nussle, president and chief executive of the Credit Union National Association. "Examinations should be based on the laws Congress passes and the regulations that NCUA enacts, not on examiner interpretation of 'best practice' or guidance."
