With all the political rhetoric and general public frustration with Members of Congress, community bankers might find reason to disengage from the political process. But this is certainly not the time to do so. Rather it is a time to “turn up the heat” on our elected officials and ask for their support of several important pending regulatory relief initiatives.
IBAT and ICBA’s ongoing campaign to address overly burdensome regulations and harsh exams has made progress in Congress with the growing support and hearings on a series of House bills. The measures take various approaches to a specific goal—reduce the onerous regulatory burden community banks face to help support a more robust economic recovery.
Working with Borrowers
Federal banking regulators could not arbitrarily penalize community banks for working constructively with borrowers under ICBA-supported legislation sponsored by Rep. Bill Posey (R-Fla.). The Common Sense Economic Recovery Act (H.R. 1723) would establish common-sense criteria for determining when a loan is performing and would stop regulators from assigning non-accrual status to performing loans.
H.R. 1723 would treat loans as performing if they are current; no more than 30 days delinquent in the previous six months; amortizing loans; and not funded through an interest reserve account. The bill also requires the Financial Stability Oversight Council to conduct a study of how to prevent contradictory guidance on loan classifications and capital requirements from the federal banking agencies.
We believe the bill will go a long way toward creating rational and consistent loan classifications, which will strengthen bank balance sheets and improve the oppressive examination environment.
Examining the Exam Environment
IBAT and ICBA are also advocating an inspector general to study examination and resolution policies that may contribute to the harsh exam environment. We are particularly interested in focusing the study on the effect of paper losses that cause institutions to raise more capital and of commercial real estate loan workouts.
Both IBAT and ICBA believe raising awareness of these concerns will change examination practices and give momentum to legislation, such as H.R. 1723, that would directly address these exam problems.
Communities First Act
Finally, congressional support continues to build for IBAT/ICBA-advocated legislation sponsored by Rep. Blaine Luetkemeyer (R-Mo.) that includes a variety of regulatory and tax provisions benefiting community banks.
The Communities First Act (H.R. 1697), now has 27 bipartisan cosponsors, including Representatives Kenny Marchant and Ted Poe from Texas. The bill would address overregulation and promote lending by:
- extending the five-year net-operating-loss carryback provision,
- increasing the threshold number of bank shareholders from 500 to 2,000 that triggers Securities and Exchange Commission registration,
- requiring the SEC to conduct a cost-benefit analysis before approving any proposed accounting change,
- deferring taxation of interest on long-term certificates of deposit and capital gains rates to better reward saving and investing,
- enhancing a variety of rural lending programs, and
- amending the Wall Street Reform Act to restore bank reliance on external credit ratings and to allow the Financial Stability Oversight Council to veto Consumer Financial Protection Bureau rules that are deemed to have an adverse impact on a subset of the financial industry.
Regulatory burdens and the overly harsh exam environment continue to plague community banks and limit economic recovery. Both IBAT and ICBA are working hard to advance these legislative priorities, but continued grassroots outreach is essential to get these critical measures through Congress.
We encourage you to ask your Member of Congress to co-sponsor these important initiatives.