Tiered Regulation and Regulatory Relief



CBAI is hopeful that Congress and the Trump Administration will support the passage of meaningful regulatory relief for community banks. The continuing decline in the number of community banks combined with an increased concentration of banking assets in the mega banks pose a threat to our financial system and economy. Community banks are suffocating under an unprecedented regulatory burden which has driven many small banks to merge out of existence. Dealing with the increased regulatory burden is diverting scarce community bankers’ resources from serving their customers and communities to new compliance requirements, reviews and documentation.

The financial crisis demonstrated that the risks taken by Wall Street are very different from those taken by community banks, and regulations should reflect those differences. The regulatory burden imposed on community banks by a one-size-fits-all approach ignores the disproportionate burden of banking laws and regulations on community banks. Credit unions, Farm Credit System lenders and other non-bank financial services providers are not subject to the same laws and regulations as community banks. This unlevel playing field places community banks at a significant competitive disadvantage.

CBAI supports the ICBA’s Plan for Prosperity, a policy platform for the 115th Congress that promotes a regulatory environment in which community banks can thrive and contribute to their local economies. The Plan contains flexible priorities to ease excessive, redundant and costly regulations while supporting greater regulatory accountability to help community banks dedicate more of their resources to promoting economic growth. The steady increase in regulations over many years threatens community banks and their communities.

The ICBA Plan for Prosperity contains the following issue areas and specific recommendations.

Access to Capital

  • Restore the original intent of the Basel III rule
  • Create a more accurate identification of “systemic risk”
  • Spur additional capital for small bank holding companies by modernizing the Federal Reserve’s policy statement (SBHC designation increase from $1 to $10 billion)
  • Relieve community banks from excessive Securities and Exchange Commission rules
  • Repeal the Collins Amendment for non-SIFIs
  • Address minority bank capital challenges

Regulatory Relief

  • Balance consumer regulation through more accountable Consumer Financial Protection Bureau governance
  • Eliminate arbitrary “disparate impact” fair lending lawsuits
  • Ensure the viability of mutual banks through new charter and capital options
  • Support rigorous cost-benefit analyses of all new rules to determine if they are justified and needed
  • Modernize the Bank Secrecy Act (BSA)
  • Cut the red tape in small business lending by eliminating burdensome data collection
  • Target the Volker Rule on a banks’ individual risk
  • Preserve access to investment advice for middle-class savers

Mortgage Reform

  • Create a safe harbor from onerous underwriting standards
  • Establish relief from burdensome HMDA, escrow and appraisal requirements
  • Preserve the ability for community banks to continue servicing mortgage loans
  • Reform the closing process and accompanying paperwork

Bank Oversight and Examination

  • Strengthen accountability in bank exams and create a workable appeals process
  • Reform bank oversight and examination to better target risk

Tax Relief

  • Lower marginal rates needed for individuals, corporations and businesses
  • Incentivize credit for low- and middle-income customers and American agriculture
  • Modernize Subchapter “S” constraints (increase shareholders limits from 100 to 200)
  • Create limited liability corporation (LLC) option for community banks
  • Repeal the estate tax
  • Update the bank qualified (BQ) bond issuer limitation
  • Support a five-year loss carryback that encourages lending during economic downturns
  • Create a tax credit for Bank Secrecy Act (BSA) compliance costs

Agriculture and Rural America

  • Address arbitrary agricultural loan concentration limits
  • Institute tax relief for rural lending

CBAI urges Congress and regulators to expand and refine a tiered regulatory system based on bank size and risk profile to ensure that every law, rule and regulation clearly distinguishes and appropriately regulate community banks.

Helpful Links

CBAI’s 2017 Federal Policy Priorities

CBA’s Plan for Prosperity

Legislative and Regulatory Successes

Report on Staff Visit to Washington D.C.

CBAI’s Call on Washington

CBAI’s Capital Conference