Senators Urge Tailored Regulations for Community, Regional Banks

A bipartisan group of 70 senators wrote to the Consumer Financial Protection Bureau yesterday, calling on the agency to exempt community banks and credit unions from certain regulations. Led by Senate Banking Committee members Joe Donnelly (D-Ind.) and Ben Sasse (R-Neb.), the letter cited a provision of the Dodd-Frank Act allowing the bureau to adapt regulations by exempting “any class” of entity from its rulemakings.

“We agree that it is important for consumers to be empowered to take more control over their economic lives, and that bad actors should be rooted out of the financial marketplace,” the letter said. “However, the CFPB must also consider its impact on community-based depository lenders, who are essential to spurring economic growth and prosperity at a local level, and not disrupt the good work of community lenders to help someone start a business, buy a home or car, or put their kids through college.”

A similar letter was sent to CFPB Director Richard Cordray in March by a bipartisan group of 329 House members. Cordray has declined to take action using this exemption authority in the past.

Meanwhile, four Democratic senators — Mark Warner (Va.), Gary Peters (Mich.), Bob Casey (Pa.) and Tim Kaine (Va.) — wrote today to the federal banking agencies urging them to revisit Basel III liquidity and capital requirements for regional banks. While they noted that Basel III does differentiate supervision for large banks, “this distinction is applied unevenly across different institutions despite similar risk profiles, simply by virtue of an asset threshold.”

The senators urged the agencies to review the reporting period for the Liquidity Coverage Ratio for regional banks and to revisit the advanced approaches risk-based capital regime, which has not been fully reviewed since the implementation of post-crisis reforms in the U.S.

“I am encouraged by this bipartisan show of support for better tailoring our regulatory architecture based on a variety of metrics — not just asset size,” said ABA President and CEO Rob Nichols. “Ill-tailored rules are artificial barriers to growth, hurting our economy and our nation’s bank customers.”