The national banks that survived the economic crisis seem to have done so with very few scars, and in the aftermath can more easily afford the resulting increase in regulation – an issue on which local community banks have strong opinions.

Now, thanks to a new Federal Reserve Bank of Boston (FRBB) council, some can say it directly to policymakers.

The dozen Community Depository Institutions Advisory Councils nationwide are new committees formed to share concerns with each of the 12 regional banks in the Federal Reserve system. They’re designed to listen to the specific concerns of smaller institutions as they deal with economic issues and the onslaught of new regulation, and are the first of their kind dedicated specifically to listening to all types of smaller institutions.

The Boston council, made up of community banks and credit unions from across New England, has five Bay State CEOs.

Reaching Out

The council is limited to institutions of less than $10 billion in assets. Selected members met for the first time on March 1 with FRBB President Eric Rosengren. Bill Stapleton, chairman of the council and CEO of Northampton Cooperative Bank, will take the group’s discussions to the national council and present its conclusions to the Federal Reserve Board of Governors later this year.

It’s too soon to tell whether these talks will have any tangible result for smaller banks, but local committee members call it a positive step.

“This is a real overture by the Fed to reach out to community banks,” Stapleton said. He added that, because most community institutions steered well clear of the risks of their larger competitors, more policymakers have shown an increased interest in the role of community institutions in the industry.

The councils are a change from the norm: While the Fed hosts a number of advisory councils, including one for large banks on the national level, this is a rare chance for a group of various community institutions to speak their mind directly.

Recent history hasn’t been kind to many smaller institutions nationwide. Media reports – and bankers themselves – have repeatedly noted that community banks have endured prolonged woes from the financial collapse and subsequent regulatory overhaul.

Larger banks that participated in the Troubled Asset Relief Program (TARP) repaid their funds more quickly and are mostly thriving, while smaller banks that still have TARP funds were far more likely to miss dividend payments, according to information from the U.S. Treasury Department.

Time To Bank

Even for healthier institutions participating in the economic recovery, regulatory changes are driving up costs – which, they say, is a particularly tough burden to shoulder.

For example, Bank of America’s size enables it to shrug off the mandated opt-in program for debit overcharges; it can just decide to toss that program completely and find fee income elsewhere, said Tom Caron, president and CEO of Bank of Easton and a council member. But his bank would really struggle if that source of fee income dried up entirely, he said. Dealing with compliance issues and adapting to regulation takes up ever more time and expense.

“There’s very little time left over for being a banker,” he said.

But Caron was encouraged that his fellow council members all had essentially the same concerns and critiques, which helped get their message across. Rosengren took the meeting seriously, he added, which was also encouraging.

As to whether that will translate into actual regulatory relief for bankers, Caron said he was keeping his expectations in check.

“I think there’s lot of sympathy for us,” he said. “I don’t think there’s going to be a lot of action.”

Many lawmakers do try to help out the smaller institutions, but it’s tough to be optimistic after years of expanding regulation. Policymakers are starting to better understand the concerns of community institutions, and the local councils give them a stronger voice – it all just depends on whether the right people are influenced by these discussions.

Christopher Oddleifson, CEO and president of Rockland Trust Co., noted that Fed Chairman Ben Bernanke and FDIC Chairwoman Sheila Bair both have talked specifically about regulatory impacts on smaller institutions. But, like Caron, he said the council would have to wait and see if the “pause button” would be hit on the cascade of new compliance rules.

“My sense is, this is a step forward,” he said.

FRBB Spokesman Tom Lavelle said smaller institutions have been represented across a number of the bank’s various councils, but this new initiative adds a “street-level” perspective from a very specific group.

“It gives us another window on the economy,” he said. “It’s most helpful to hear directly from the community banks, and to hear directly about the challenges they’re confronting."