Community Bank Persistence Pays Dividends

800px-US_capitol_domeIt wasn’t exactly what ICBA was advocating; nevertheless, nearly all community banks scored a major victory with the industry’s hard-fought exemption from a backdoor tax hike on most members of the Federal Reserve System.

Following passionate industry advocacy to scrap a Senate-passed plan that would have required all Fed-member banks to pay for federal highways via cuts to Fed dividend payments, lawmakers agreed to exempt community banks under $10 billion in assets. Larger banks will receive a floating dividend not to exceed 6 percent (which in itself is far superior to the flat 1.5 percent rate that was contained in the original bill).

While ICBA and community bankers have pushed to completely drop the dividend cut ever since the ill-conceived proposal advanced last July, this community bank exemption will save our industry an estimated $200 million each year. That’s roughly $150,000 in annual savings for a $500 million bank, $300,000 for a $1 billion bank, and so on. With more than 1,800 members of the Federal Reserve at less than $10 billion in assets, the benefits will be felt in communities nationwide.

We were also able to push through some beneficial regulatory relief policies from ICBA’s Plan for Prosperity. The bill eliminates redundant privacy notice requirements, expands the 18-month exam cycle, eases restrictions on rural mortgage lenders, enhances TruPS CDO relief for small bank holding companies, and allows thrift holding companies to take advantage of new SEC registration thresholds. Further, the final law restores funds cut from the federal crop insurance program and drops an ICBA-opposed plan to raise Fannie Mae and Freddie Mac guarantee fees.

Together, these successes show what ICBA and the community banking industry can accomplish by working together on all fronts. No, we didn’t get everything we wanted—a complete withdrawal of this bad public policy—but by being the first to identify this issue and then bird-dogging it and never giving up on it, we made a meaningful difference for our industry. Thank you, community bankers, for all of your hard work. And congratulations on this outstanding success, which will provide lasting benefit to your customers and communities across the nation.

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