Wednesday, July 29, 2015

Following repeated, and increasingly questionable, verbal assurances that Congress is working to limit the impact of excessive regulation on Americans, community bankers recently made it clear that lawmakers can’t have it both ways.

It is time for members of Congress to end the lip service and tell us the truth—are they with us or against us?

In a letter last week to all 535 congressional offices, the Independent Community Bankers of America promised to share a list of lawmakers cosponsoring our top-priority bills to the nation’s community banks—which are present in every congressional district across the country. Members of Congress not on the list will be sorely missed.

Joining a handful of noncontroversial relief bills should be a no-brainer for anyone on Capitol Hill who wants to prevent government overreach from further disrupting locally based banking and economic growth. The problem goes back well before the 2008-09 financial crisis, a calamity that community banks did not cause. Since 2005, the sheer number of discrete regulatory requirements has increased by nearly 40 percent. However, Washington’s response to the crisis has exacerbated overregulation with new rules on mortgage lending and capital standards that have restricted community bank lending and consumer access to credit. According to a new SNL survey, 35 percent of respondents said compliance costs have increased by at least 30 percent over the past five years.

This immense amount of added regulation, while often targeted at Wall Street megabanks, nevertheless has a tangible impact on community-based institutions and their customers. The Basel III rules originally intended for global institutions will tie up critically important capital in Main Street banks that would otherwise fuel local economic growth. Among other things, these capital regulations will effectively decrease community bank mortgage-servicing capacity by 90 percent, which is why more than 17,000 community bankers have signed a petition seeking an exemption.

The regulatory response also is reducing the services local institutions are able to offer. Roughly three-quarters of community bankers responding to an ICBA survey earlier this year reported that new mortgage regulations are keeping them from making more residential mortgage loans in their communities. Significant percentages of community banks are considering an exit from the residential mortgage market or are in the process of exiting the market. Additionally, a 2014 survey of small banks by George Mason University’s Mercatus Center found that 90 percent of respondents said they are reconsidering their product and service offerings, such as residential mortgages and overdraft protection, due to the increased regulatory burden.

These data are directly supported by what Main Street lenders and borrowers are saying about the current environment. A March House Financial Services Committee hearing cited numerous stories of creditworthy individuals who were turned away because of inflexible new rules, including recently relocated doctors and teachers as well as small-business owners who can’t meet income-documentation requirements.

In short, federal regulations are injuring the customers they are intended to protect. Partisan politics has frozen a bevy of non-controversial policies pending in Congress, such as relief from excessive mortgage rules, examination requirements and quarterly reporting mandates. That’s why community bankers are calling for action instead of more talk. With more than 6,000 community banks holding $2.4 trillion in loans to consumers, small businesses and the agricultural community, there are plenty of reasons for Congress to work together to offer needed regulatory relief in any of the dozens of bills waiting for a vote on Capitol Hill. Congress should work together to ensure regulations don’t keep these institutions—more than 2,700 of which are over 100 years old—from continuing to serve their hometown customers.

Camden R. Fine is President and CEO of the Independent Community Bankers of America.

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