Testifying on the American Bankers Association’s behalf before a House Financial Services subcommittee today, a midsize bank executive emphasized the importance of proposed legislation that would remove arbitrary asset thresholds that impose limits on growth. Charles Tuggle, EVP and general counsel at Memphis, Tenn.-based First Horizon National Corporation, commended Rep. Blaine Luetkemeyer’s Systemic Risk Designation Improvement Act (H.R. 3312) and described how it will help his company serve its markets better.
“For a bank like mine, soon to have $40 billion in assets, the prospect of crossing the arbitrary asset threshold at $50 billion — which will trigger much greater expense and will be a significant drain on existing resources — is very troubling,” Tuggle said. “The fact that we are growing means that we are successfully and effectively meeting the needs of our customers.” The bipartisan H.R. 3312 – which passed the House in the last Congress — would end automatic designation of systemically important financial institutions based on asset levels and replace it with a formal process that recognizes a variety of systemic risk factors.
Tuggle pointed out that the current threshold is an onerous tax on growth that requires midsize banks to strategically limit organic growth in order to avoid triggering the threshold. “If we don’t continue to grow organically, then we’re not going to be able to extend the levels of credit that our communities need,” he said. He pointed out that the threshold is driving large merger deals that allow banks hovering below the $50 billion asset threshold to absorb the cost of SIFI compliance.
The one-time cost of growing above the SIFI threshold for a bank may be as large as $80 million, according to a study that Tuggle cited, along with added ongoing annual compliance costs of up to $60 million. “If the cost of that is so great that growing means we’ll actually have less money to spend in the form of credit, investment in technology and investment in new people, that doesn’t make sense at all,” he said.
Tuggle also expressed ABA’s support for two pieces of draft legislation under consideration. One, to be introduced by Rep. Claudia Tenney (R-N.Y.), would provide relief to smaller mortgage lenders from escrow requirements for higher-priced mortgage loans. The other, championed by Rep. French Hill (R-Ark.), would begin to provide much-needed clarity on the TILA-RESPA integrated disclosures, Tuggle said.