Federal Reserve Chairman Ben Bernanke had some positive things to say this week about the nation’s community banks. Noting that community banking is fundamentally a local and relationship-based business, the Fed chairman said that community banks have a natural incentive to act in the interests of their communities.
Chairman Bernanke also focused on one of the industry’s greatest challenges—the cost of complying with new and existing regulations. He said the Fed understands community banker concerns with regulatory burdens and is committed to scaling its regulations to banks’ size and complexity.
Needless to say, this was music to my ears. Crushing regulatory burdens collectively pose the greatest threat to the survival of the community banking industry. By sapping local institutions of resources they could be devoting to serving their customers and promoting growth, overly burdensome regulations make community banks less competitive, deter de novo charters, and drive industry consolidation.
As I said this week on Bloomberg TV, this is a very real, existential threat to our industry. And ensuring that policymakers understand the implications of the laws and regulations they impose is why we do a lot of the things we do at ICBA.
It’s why we’ve been working relentlessly with Congress to advance provisions of our Plan for Prosperity, our wide-ranging and practical platform of reforms that lawmakers can enact now to begin lightening the regulatory load on our industry.
It’s why this week we released our comprehensive white paper on housing finance reform to ensure that community banks—and the borrowers who rely on them—are not squeezed out of the mortgage market.
It’s why addressing our nation’s too-big-to-fail problem, which results in both economic calamities and new regulations on the community banks that had nothing to do with these crises, remains so important.
It’s why we relentlessly advocate a level playing field among all sector competitors—banks, credit unions and the Farm Credit System.
And it’s why Chairman Bernanke’s words were so valuable, because tiered regulation and two-way dialogue with regulators is essential to keeping community banks open for business. ICBA, our affiliated state and regional community banking associations, and community bankers nationwide have long called for regulations that distinguish between community banks and larger and riskier institutions. It’s good to know our voice is being heard at the highest levels.
Thank you, Chairman Bernanke. We’ll stay in touch.