Ever-growing regulatory burden is pushing community banks to merge themselves out of existence, a trend that will continue unless lawmakers provide some regulatory relief, the American Bankers Association told Senate Banking Committee this week.
"This is not a new subject, yet the imperative to do something grows every day. Community banks are resilient. We have found ways to meet our customers’ needs in spite of the ups and downs of the economy. But that job has become much more difficult by the avalanche of new rules, guidances and seemingly ever-changing expectations of the regulators," Daniel Blanton, CEO of Southeastern Bank Financial Corp. and Georgia Bank & Trust in Augusta, Ga., said to the committee on behalf of the ABA.
He also pointed out that America now has 1,200 fewer community banks than it did five years ago, and that that trend would not abate unless lawmakers could make "rational changes" and ease the burden on smaller financial institutions.
Already, Blanton said, regulatory burdens have shaped the way banks do business. He said that 58 percent of banks have held off or canceled the launch of new products and 44 percent have reduced products or services to better comply with regulations.
Blanton’s testimony comes after the ABA recently shared its legislative platform – focusing on helping America’s hometown banks serve their customers and grow the economy – with members of Congress. In addition, the association’s 2015 Key Banking Issues publication outlined four distinct areas where lawmakers can take action, including removing impediments to serving customers, eliminating distortions by government in the marketplace, improving access to home loans and facilitating growth to loans, jobs and the economy.
Blanton encouraged Congress to work together to pass bipartisan legislation in these areas, particularly in the mortgage space.
"It is painfully clear that new regulatory requirements have restrained mortgage lending, and have made it particularly difficult for first-time homebuyers to obtain a home loan," Blanton said. "Over-regulation of the mortgage market has reduced credit available to bank customers, raised the cost of services and limited bank products. The result has been a housing market that still struggles to gain momentum."
Blanton urged Congress to ensure that loans held in portfolio are treated as Qualified Mortgages, noting that the Dodd-Frank Act’s restrictive definition of "ability to repay" is having a detrimental impact on the market and consumer access to credit.
He closed his remarks encouraging Congress to act on a number of fronts, including expanding the number of highly rated community banks eligible for an 18-month exam cycle, providing an independent appeals process for bank examination decisions and several other important measures.
