Congress continues pressing regulators on community bank reg burden

Members of Congress continued to press prudential regulators about the impact of their rulemakings on community banks during a second day of oversight hearings.

Committee Questions: With banking regulators appearing before the House Financial Services Committee, lawmakers expressed concerns about a series of recent rulemakings.

  • National Security Subcommittee Chairman Blaine Luetkemeyer (R-Mo.) said a Federal Reserve proposal to lower debit card interchange fees would benefit large merchants at the expense of community banks, exacerbating the impact of the Durbin Amendment.

  • Rep. Roger Williams (R-Texas), who separately chairs the House Small Business Committee, raised concerns about the community bank compliance burden from the agencies’ Community Reinvestment Act final rule.

  • Rep. Nydia Velazquez (D-N.Y.), the Small Business Committee’s ranking member, sought assurance that the agencies’ proposed capital rules for banks over $100 billion in assets would exempt community banks.

Regulator Response: As in Tuesday’s Senate Banking Committee hearing, FDIC Chairman Martin Gruenberg, Acting Comptroller of the Currency Michael Hsu, and Federal Reserve Vice Chair for Supervision Michael Barr emphasized community bank exemptions from various rulemakings and pledged to prevent requirements for large banks from trickling down to smaller institutions.

ICBA View: Amid a surge in rulemaking activity, ICBA has:

  • Commended regulators for targeting proposed capital and debt requirements to institutions over $100 billion in assets while calling on policymakers to continue to distinguish large banks from community banks.

  • Objected to the agencies’ climate principles, which include vague language describing all financial institutions and could ultimately affect community banks.

  • Expressed concerns with the CRA final rule’s disproportionate implementation costs for community banks.

  • Noted the Fed’s recent interchange proposal would harm smaller card issuers, including those intended to be exempt from the proposal.