In a detailed letter today to Treasury Secretary Steven Mnuchin, the American Bankers Association provided a number of recommendations to improve banks’ regulation and promote economic growth. ABA’s letter follows up on an April 5 industry meeting at Treasury and President Trump’s executive order that initiated a core principles review of bank regulation and oversight.
Among other things, ABA urged that rules and regulations — and regulatory enforcement — recognize the unique strengths of community banks, including minority-owned institutions, and the community bank business model. ABA also called for a review of mortgage lending rules and highlighted the challenges posed by the oncoming CECL accounting standard, Basel III’s particular impact on Subchapter S banks, fair lending enforcement that relies on the disparate impact model, and the overall need to reduce regulatory overlap and duplication.
“Community banks’ competitive advantage rests on their detailed knowledge of their local markets, local market participants, the local business environment, and the ability to customize services in accordance with that knowledge,” ABA said. “The regulatory trend of recent years to impose standardization of loans and financial services products undermines community banks’ chief competitive advantage, instead rewarding firms that make their profit from the volume of loans and services provided.”
ABA also pointed out how the artificial $10 billion threshold — whether by statute or by regulation — acts as a ceiling on community banks, forcing them to restrict their growth or otherwise face a major change in their business model. “There should be little business difference between a bank with $9 billion in assets and one with $11 billion in assets, but there is a very significant — and disruptive — regulatory difference,” ABA said.