Presidential candidates talk community banks
As the presidential campaign season moves from summer to fall, the candidates are talking about community banking and what they would do to support the industry.
Republican candidate Donald Trump has not specifically addressed community bank plans in his economic vision, but has discussed wanted to break up the big banks. Primarily, Trump's plan is to ease regulatory burden on small businesses across the board, including community banks.
He is proposing a temporary pause on new regulations and a review of previous regulations "to see which need to be scrapped," according to the economic plan on his website. In addition, he would require each federal agency to prepare a list of all the regulations they impose on American business, and rank them from most critical to health and safety, to the least critical. The least critical regulations would receive priority consideration for repeal.
Democratic candidate Hillary Clinton released a detailed proposal on community banks, saying "banks with less than $10 billion in assets are a critical source of lending to small businesses in America, making half of all small loans despite holding just 20 percent of all deposits."
The Independent Community Bankers of America said the industry needed action to ease the "crushing" regulatory burden.
"We welcome all discussions addressing the crushing regulatory burden on community banks," ICBA Senior Executive Vice President and Chief of Staff Terry Jorde told Dodd Frank Update. "Regulations meant to curb the abuses of the nation's largest financial institutions have fallen hard on the community banking industry. Since 2009 our country has lost nearly 2,000 community banks or roughly a quarter of the nation's total, and only four new community banks have been formed.
"Clearly, when an industry consolidates rapidly with no new growth we have a serious problem. If the nation's policymakers don't act very soon, it will be a tragedy for the thousands of communities and small businesses across our nation."
Clinton's plan said regulators working under the Dodd-Frank Act have taken important steps to tailor rules for smaller banks. However, "many community banks and credit unions still struggle with unnecessary regulatory complexity — hindering their ability to fuel small business growth and job creation without enhancing consumer protections or improving the safety of the financial system."
She proposes seven areas to improve the situation for community banks:
Make clear when community banks and credit unions are exempt from regulation and cut down on regulatory "creep." Although smaller institutions often are explicitly exempted from financial regulations intended for larger ones, many are spending precious resources on lawyers and consultants simply to figure out that they are in fact exempt. Clinton would require regulators to issue statements of less than five pages that explain, in straightforward language, how their rules will affect small firms. Moreover, even when regulatory exemptions are apparent, examiners often still require that smaller institutions follow rules designed for bigger ones as a matter of regulatory "best practice." Clinton would work to curtail this kind of regulatory "creep" and ensure that community banks and credit unions are only subject to rules that make sense for their size and mission.
Avoid duplicative and unnecessary examinations. Clinton believes regulators must do a better job of coordinating their examinations of community banks and credit unions and sharing information in a prompt and complete fashion.
Streamline safe mortgage lending. Clinton supports a proposal by Senate Democrats to expand the safe harbor for "qualified mortgage" liability protection to include all mortgages made by community banks and credit unions with under $10 billion in assets — so long as the loans have appropriate documentation, don't include excessive fees or interest rates, and are kept on the bank or credit union's books.
Simplify capital requirements while making sure they are appropriately capitalized. Clinton believes that regulators should explore ways to further simplify capital requirements for banks with less than $10 billion in assets, while ensuring that these initiatives do not create new risks for those banks' safety and soundness.
Streamline reporting requirements. Clinton supports efforts to meaningfully streamline financial reporting for banks with less than $1 billion in assets.
Give small financial institutions a greater voice. Clinton supports efforts to ensure that the Federal Reserve Board of Governors includes a member with expertise in issues facing smaller financial institutions. She'll also designate senior officials in the Treasury Department to work closely with community banks and credit unions.
Ensure tough and fair enforcement. When a small financial institution is caught breaking the law, both the bank and its executives are appropriately held accountable. Clinton would work to ensure that regulators and prosecutors are enforcing the laws in a tough and fair manner — holding all firms to the highest standards.
Finally, Clinton's proposal said community banking reforms offered by Republicans have been a "Trojan Horse" for attempts to roll back Dodd-Frank Act regulations for big banks. Her proposal said she would veto efforts to weaken Wall Street reform, and has a separate agenda to tackle risk and enhance accountability on Wall Street. "She also supports efforts by Senate Democrats to better protect our service men and women from financial fraud and abuse by empowering the Consumer Financial Protection Bureau to enforce the Servicemember Civil Relief Act," it said.
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