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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.
Regulatory requirements and onerous supervisory expectations increase compliance costs 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 are not subject to the same taxation, laws, and regulations as community banks. 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. Both investment and risk are flowing outside the regulated banking system where non-bank entities are not subject to comparable constraints.
ICBA’s community bank agenda for the 118th Congress encompasses regulatory relief priorities such as: (1) the removal of barriers to entry for de novo community banks; (2) reforms relating to minority depository institutions; (3) modernization of Bank Secrecy Act reporting thresholds; (4) 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 (5) community bank exemptions from proposed climate-related financial risk guidance and regulations.
ICBA’s agenda also includes a range of proposals that would create a more competitive landscape, strengthen cyber and data security, mitigate risks posed by digital assets, protect SBA bank lending, preserve and strengthen community bank mortgage lending, and provide tax relief, among other priorities.