Staying True to Our Mission

In an era of seemingly perpetual political gridlock, it’s important to pause on occasion to consider why we community bankers put so much effort into political advocacy. From our continuous and relentless regulatory relief efforts to our persistent support for fair and equitable oversight of credit unions and the Farm Credit System, community bankers certainly have a lot of irons in the fire.

That’s why, when the Washington two-step starts to make my head spin, I go back to the basics. I look to ICBA’s mission to remind myself why we do what we do. Our mission statement is short and sweet, to “create and promote an environment where community banks flourish.”

It’s a brief but powerful statement. In fact, it’s posted on the wall of our Washington office lobby, so ICBA staff can see it when they walk in every morning and walk out at night. To me, the key word is “flourish.” ICBA is here to help community banks grow, thrive, be healthy and vigorous. We combine the strength of each community bank to create an atmosphere that benefits all of them. In turn, community bankers can better serve their local customers and communities, establishing a stronger economy at the ground level.

This system goes to the heart of what we believe as an organization of community bankers. In fact, this philosophy is at the foundation of what we believe as a nation: that we are stronger from the bottom up than from the top down. That we are more powerful collectively when we are empowered individually.

At ICBA we really do have one mission: community banks. It isn’t a slogan. It’s why we’ll keep fighting for additional reforms to the Qualified Mortgage rule and why we’ll hold regulators to their promise of a streamlined call report. It’s why we are not holding anything back from a Congress that has uttered countless words of support for community banks but has yet to deliver tangible regulatory relief this year.

Yes, with so much partisan paralysis, there is a lot of unfinished business as the nights get longer and cooler here in Washington. But by maintaining our focus on a simple statement—to create and promote an environment where community banks flourish—we can clearly see how all of these moving parts fit together in a single, important mission.

Banks: An Eponym of Epic Proportions

When most people want a tissue, they say they need a Kleenex. When you cut your finger, you don’t say you need an adhesive bandage—you need a Band-Aid! When you need to make a photocopy, regardless of the brand of the machine, you make a Xerox copy. Many marketers would consider this a compliment, especially if you work for the company that’s in the common lexicon as both product and brand. But what happens when you are a unique brand that makes superior products that compete with Kleenex, Band-Aid or Xerox? Are you doomed to spend countless marketing dollars simply trying to be recognized?

Similarly, not all banks are created equal, but some in Washington would love for people to believe that all banks are the same, just as some marketers want everyone to believe that all tissues are Kleenex. For example, whether for cover or clout, some would argue there are benefits to blurring the lines between too-big-to-fail Wall Street banks and the nation’s community banks. It’s a brilliant PR move, so thinly veiled it almost sounds genuine. Let’s convince everyone that all banks suffer the same maladies of bad reputations from ill-gotten gains. Perhaps if we say it often enough, and in a convincing, empathetic tone, everyone will simply believe it’s true. After all, a bank IS a bank—a purposefully created, well-disguised eponym. How would your community bank fare as a victim of brand-washing?

This raises a challenge for our industry—the community banking industry. We must not allow the biggest and riskiest financial firms to drag our reputations down with them. We must not allow them to compromise the positive image that community banks have earned. We cannot allow them to dilute our brand.

I’m troubled when some members of the banking industry say banks have a reputation problem. Yes, the mega-banks do have a reputation problem. The too-big-to-fail Wall Street institutions that wrecked our financial system and economy have a reputation problem. But community banks are held in high regard among policymakers and the general public alike. Community banking offers positive associations, such as small-business loans to Main Street businesses, financial literacy lessons for neighborhood schools, and mortgages that help first-time homebuyers experience the American Dream.

My point is that community banks have worked hard to establish our unique position in the financial services industry, and we should not allow our brand to be taken away from us. When someone asks if you’re a banker, stand proud and say, “I’m a community banker.” If someone asks if you work for a bank, proudly say, “I work for a community bank.”

We cannot and should not be lumped together with those mega-banks whose past and continuing actions sully the good name of banking. We must defend and promote the community bank brand proudly because nobody else will do it for us—certainly not Wall Street. At ICBA we give voice to and work for community banks every day, and we will keep doing everything we can possibly do to prevent our brand from being tarnished or taken away from us. We are different; we are unique; we are community banks.

Guest Blog: Giving Credit Where It’s Due—with Community Bankers

ICBA Staff PortraitsBy Terry J. Jorde

Congratulations, community bankers! This week we saw once again that our industry’s hard work and determination on behalf of regulatory relief can achieve tangible results in Washington.

Following passionate advocacy from ICBA and community bankers, regulators issued a proposed rule to simplify community bank call reports and laid out their plan for considering additional reporting relief in the coming months. While there is still a long way to go to get the relief we’ve advocated, this announcement is an important first step in one of our top-priority regulatory relief initiatives. And it is due exclusively to the community bankers who have stood up and demanded change.

The Federal Financial Institutions Examination Council (FFIEC), which is made up of all of the bank regulatory agencies, this week issued the first part of their plan, which would delete certain data items and revise reporting thresholds. More important, however, is the council’s pledge to evaluate the creation of a streamlined quarterly call report for community banks and to continue its dialogue with our industry. This promise is a big win for community banks because it could ultimately lead to our goal—a shorter, less burdensome and more sensible call report, which is a key element in ICBA’s overall regulatory relief strategy.

Lest you think the regulators came up with this idea out of thin air, it is important to understand that getting to this point has required education, patience and diplomacy. And our work is far from over. But make no mistake about it, any success we achieve on this front has a very specific source—community bankers and their ICBA team in Washington!

The announcement comes one year—almost to the day—after ICBA leadership met with the FFIEC in our offices and delivered a petition with nearly 15,000 signatures representing almost 2,500 community banks urging call report relief. The ICBA petition, which we spent a month collecting signatures on last year, was inspired by a broad industry survey, in which we found the annual cost of preparing the call report has increased for 86 percent of respondents over the past 10 years. Further, 98 percent of respondents said a short-form call report would reduce their regulatory burden, and 72 percent said the reduction would be “substantial.” Banks under $500 million told us they spent on average 122 hours per year on the call report, while preparation time for banks greater than $500 million jumped to an average of 274 hours per year!

Having real community bankers on ICBA’s staff—those who have actually prepared the quarterly call report—helps the association understand first-hand the burden it poses to Main Street institutions. ICBA’s experienced team of dedicated staff has heard the industry’s calls for reform loud and clear and has taken that message directly to the regulators. And to their credit, the regulators are listening and have acted upon the industry’s call to action. But the real credit for this crucial step forward goes to the thousands of community bankers who answered surveys, signed petitions, wrote letters, spoke up at EGRPRA meetings and hosted regulators in their banks to personally show them the burden of call report preparation.

ICBA is in this for the duration and will continue working with regulators to maximize call report relief for community banks. But for now, I say kudos to community bankers. Thank you for your efforts to achieve positive results in the face of arduous regulatory hurdles. And never forget that you are capable of making real change in Washington through your hard work, determination and dedication to doing what’s right for communities across this great nation.

Let’s Put a Stop to Credit Union End Run Around Congress

The United States has three branches of government to prevent any one from having too much power. The tax-exempt credit union industry apparently skipped this civics lesson because it obviously doesn’t believe it should have to listen to Congress.

The National Credit Union Administration has proposed dramatically revising business-lending rules for these tax-subsidized institutions. Current law allows any credit union to make business loans worth up to 12.25 percent of its total assets. While lawmakers have repeatedly declined to advance controversial legislation to raise this cap, the NCUA has unilaterally done so on behalf of the industry it is supposed to regulate.

It is up to community bankers to call out the NCUA for sidestepping the cap established by Congress and attempting to extend the industry’s government-funded competitive advantage. ICBA offers community bankers a customizable letter to Congress and the NCUA to express opposition to this misguided plan.

The NCUA’s proposal blatantly skirts the statutory cap by exempting more loans from it, removing explicit loan-to-value limits and increasing the population cap for community charters by 400 percent. By piling on additional exemptions, the plan increases risks to the financial system. According to the Capital Policy Analytics Group, credit unions with the highest levels of business loans represent a disproportionate share of credit union failures, showing the risks of blanketing these institutions with new business-lending authorities.

The NCUA wants to assuage public concerns over these risks by requiring credit unions to create credit policies and risk-rate their loans. Rather than offering reassurance, this suggestion is an alarming admission of the weak oversight and regulatory standards now in place for credit unions. Credit policies and risk-rating systems have been standard community bank practices for decades—where have the credit unions been?

The truth is that aggressive and fast-growing credit unions are seeking to leverage their tax-exempt status to siphon top-performing small-business loans away from community banks, which actually pay taxes to their federal, state and local governments. Nearly 99 percent of credit unions below the federally mandated cap can already expand their lending if they choose to do so, with no change to federal law or regulation. And there are already plenty of ways to circumvent the limit because loans under $50,000 and Small Business Administration loans as large as $5.5 million don’t count toward it. Continuing to relax these congressionally mandated restrictions will only serve the interests of the riskiest, growth-oriented credit unions, while putting the broader financial sector at greater peril.

Credit union business-lending caps were established by Congress because these tax-subsidized institutions are designed to serve people of modest means with a common bond. These days, multi-billion-dollar credit unions are allowed to have virtually no common bond among members, yet they continue to operate tax-free. Meanwhile, they remain unique among lenders due to their exemption from regulations such as the Community Reinvestment Act.

Community bankers, tell Congress and the NCUA that the regulator should focus on implementing and enforcing credit union laws as they are written. If credit unions want to operate like banks, they should be taxed and required to meet the same set of regulatory standards. They can’t have it both ways.