Tiered Regulation for Community Banks

Credit unions and other nonbank institutions, such as industrial loan companies (ILCs) and fintech companies that perform “bank-like” functions and offer comparable products and services, are not subject to the same taxation, laws and regulations as community banks.


  • Community banks need regulatory relief to support the financial needs of their customers, serve their communities, and contribute to their local economies.

  • ICBA urges Congress and the regulatory agencies to continue to expand and refine a tiered regulatory and supervisory system that recognizes the significant differences between community banks and large, complex institutions in terms of the risks they pose to consumers and to the financial system.

  • To preserve their original purpose and remain aligned with an evolving financial services landscape thresholds for regulatory accommodations and exemptions based on asset size, risk profile, and transaction volume should be continually reviewed and adjusted upward as community banks consolidate and the average asset size of banks increases.


Regulatory requirements and onerous supervisory expectations increase compliance costs, strain employee talent retention and recruitment efforts, and disproportionately burden community banks. These burdens diminish community banks’ ability to attract capital, support the financial needs of their customers, serve their communities, and contribute to their local economies.

Large banks have massive, dedicated legal and compliance staff and can more easily absorb regulatory costs. Credit unions and other nonbank institutions, such as industrial loan companies (ILCs) and fintech companies that perform “bank-like” functions and offer comparable products and services are not subject to the same taxation, laws, and regulations as community banks.

This uneven field places community banks at a competitive disadvantage and inhibits their ability to direct resources toward their customers. In addition, unreasonable regulatory requirements serve as a barrier to entry for investors who might otherwise contemplate the formation of de novo banks.

Without the entry of a sufficient number of de novo banks to offset consolidation, the industry has become progressively more concentrated to the detriment of individuals, families, local communities, and small businesses. Both investment and risk are flowing outside the regulated banking system where non-bank entities are not subject to comparable constraints.

The CARES Act, which was passed in April 2020 in response to the COVID-19 pandemic, contained several ICBA-supported regulatory relief provisions including temporary relief from troubled debt restructurings (TDR) and FASB’s Current Expected Credit Losses (CECL), as well as instituting a temporary community bank leverage ratio (CBLR) of 8 percent in 2020 and 8.5 percent in 2021.

To mitigate the impact of community bank participation in the Paycheck Protection Program (PPP), the receipt of economic stimulus monies, and the resulting swell of deposits held by community banks, the regulatory agencies temporarily changed the asset thresholds for a number of regulatory requirements including the accounting and audit requirements under Part 363 of the FDIC regulations, the requirements for an 18-month exam cycle, the Small BHC Policy Statement, and the eligibility requirements for using the CBLR framework.

The FDIC also issued rules to mitigate the impact of PPP on deposit insurance assessments. In 2022, ICBA will continue to advocate that these temporary regulatory relief measures be made permanent, or in the alternative, be extended through 2022 to allow deposit runoff and the return of pre-pandemic deposit levels.

ICBA’s community bank agenda for the 117th Congress encompasses regulatory relief priorities such as the removal of barriers to entry for de novo community banks, reforms relating to minority depository institutions, modernization of Bank Secrecy Act reporting thresholds, a community bank exemption from Section 1071 of the Dodd-Frank Act which would impose HMDA-like reporting requirements for small business loan applications, and an extension of the 8.5 percent CBLR.

ICBA’s agenda also includes a range of proposals that would create a more competitive landscape, strengthen cyber and data security, preserve and strengthen community bank mortgage lending, and provide tax relief, among other priorities.

For 2022, ICBA will also pursue further regulatory relief from the agencies including:

  1. A permanent 8 percent CBLR, or in the alternative, an extension of the 8.5 percent CBLR through December 31, 2022
  2. An exemption from CECL for community banks that are not SEC accelerated filers, or in the alternative, delaying the implementation date until 2025 for those community banks that have not yet adopted CECL
  3. Permanently raising the $500 million and $1 billion asset thresholds under Part 363 auditing and accounting requirements, or in the alternative, extending temporary relief from asset threshold requirements through December 31, 2022
  4. A consistent CRA regulatory framework among the agencies
  5. A robust community bank exemption from the small business reporting responsibilities under Section 1071 of the Dodd Frank Act
  6. Community bank exemptions from proposed climate-related financial regulations

Staff Contacts: Susan Sullivan, Chris Cole, and Jenna Burke

Staff Contacts

Susan Sullivan

Vice President, Congressional Relations

Washington, DC


Christopher Cole

Executive Vice President, Senior Regulatory Counsel

Washington, DC


Jenna Burke

Senior Vice President and Senior Regulatory Counsel

Washington, DC


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