More reg relief possible

Leadership at the regulatory agencies provides hope for additional regulatory relief. We featured the new Comptroller of the Currency, Joseph Otting, on our cover three months ago. Among a number of favorable initiatives, the former banker is focused on updating and clarifying CRA for both consumers and bankers. The new FDIC Chairman, Jelena McWilliams, recently outlined several reg relief priorities. Check out our report on her recent comments made to bankers in Milwaukee.

And now most recently, new Federal Reserve Board Governor Michelle Bowman is talking about the importance of reg relief for community banks. Speaking at the ABA Conference for Community Bankers in San Diego on Feb. 11, the former Kansas banker and top state bank regulator talked about the importance of reducing regulatory burden.

“Given the straightforward nature of community banking, regulators have an obligation to develop and refine approaches to supervision that fit the smaller size and less complex risk profiles of these banks,” she said. “If we keep our focus on appropriately tailoring regulatory requirements for community banks so they may continue to prudently thrive, then community bankers should be able to devote more resources and time to serving their customers and communities.

“Ultimately, when access to credit is limited, communities suffer and so does the larger economy,” Bowman continued. “In view of these goals and contributions, and an understanding that systemic risk is not likely to be posed by any single community bank, the Federal Reserve continues to tailor supervision and refine our approach to risk-focused examinations of community banks.”

In more than three decades of covering banking, I have never known of such a favorable regulatory environment, at least as gauged by agency leadership. But that doesn’t mean bankers can sit on their hands. Readers should urge the regulatory agencies to set a community bank leverage ratio of 8 percent instead of the 9 percent they currently are proposing. A proposal by the Fed, FDIC and OCC to implement Section 201 of the May 2018 reg relief law is accepting public comments until April 9.

The law allows regulators to set a ratio between 8 and 10 percent. Many community bankers will choose to maintain capital well in excess of regulatory minimums, but other bankers might have better options for investing dollars currently tied up in capital. Across the industry, there are millions of investment dollars at stake. The best reg relief measures make more dollars available for investment in our local and national economies.