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ICBA Comments on Dodd-Frank: One Year Later

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RISMEDIA, July 21, 2011—As the Dodd-Frank Wall Street Reform and Consumer Protection Act approaches its one year mark, the Independent Community Bankers of America (ICBA) is working on behalf of the nation’s more than 7,000 “Main Street” community banks to minimize negative regulatory effects and is advocating for legislation that will ensure the stability and vitality of community banks for generations to come.

During a recent conference call with media, ICBA President and CEO Camden R. Fine said that while Dodd-Frank created an important precedent distinguishing Main Street community banks from the Wall Street megabanks, ICBA is working diligently to ensure that regulations coming out of the law don’t stunt community banks’ growth or ability to serve their local markets—many of which are small towns and rural areas that would otherwise be underserved if it were not for their local community bank.

“More needs to be done to protect community banks, which reinvest in their communities by employing residents, putting deposits to work locally and investing in the small businesses that drive the local economy,” Fine said. “Community banks are common-sense lenders that take pride in serving the needs of their communities, and they should not be unduly burdened by regulations that were intended to correct the behavior of abusive players, unscrupulous lenders and irresponsible risk managers that took our nation’s economy to the brink.”

While ICBA earned several wins for community banks in the Dodd-Frank Act, namely changes in the FDIC assessment base, stricter oversight of too-big-to-fail institutions and the inclusion of nonbank financial firms under consumer compliance regulation and supervision, ICBA is fervidly fighting to ensure a favorable regulatory and legislative environment that will allow community banks to thrive.

Key Dodd-Frank regulations that ICBA is working to fix include:

• Federal Reserve rule on debit card interchange: ICBA fought and warned about the unintended consequences of government intervention from the harmful Durbin amendment in Dodd-Frank and Fed rule implementing it. While improvement was made in the final rule, there is no doubt that consumers will feel the effects of this harmful rule once it goes into effect. ICBA is working with the Fed and the networks to minimize the adverse impact on consumers and their community banks. ICBA will also promote payment card network rule changes related to liability and enforcement in this new environment of government price controls.

• Qualified Residential Mortgage or “QRM” provision: ICBA is working with other trade groups to address regulatory concerns that would require a QRM have a minimum down payment of 20 percent. Such a high down-payment requirement will be particularly hard for qualified first-time and lower-income borrowers to meet, exacerbating a still fragile housing market and hampering the economic recovery.

• Consumer Financial Protection Bureau (CFPB): ICBA wants to ensure that bank regulators have direct and meaningful input into CFPB rules while also replacing its single director with a commission. Pending legislation would also create a more realistic standard for Financial Stability Oversight Council veto of CFPB rules. It would also require joint CFPB rulemaking that involves bank regulators.

Key ICBA-backed legislation includes:

• The Communities First Act, H.R. 1697: This bill would bolster economic recovery by helping community banks continue to reinvest in their communities and grow small businesses and jobs at the local level. It would also address overregulation, reduce unnecessary costs and promote lending by:

• extending the five-year net-operating-loss carryback provision,
• increasing the threshold number of bank shareholders from 500 to 2,000 that triggers Securities and Exchange Commission registration,
• requiring the SEC to conduct a cost-benefit analysis before approving any proposed accounting change,
• deferring taxation of interest on long-term certificates of deposit and capital gains rates to better reward saving and investing,
• enhancing a variety of rural lending programs, and
• amending the Wall Street Reform Act to restore bank reliance on external credit ratings and to allow the Financial Stability Oversight Council to veto Consumer Financial Protection Bureau rules that are deemed to have an adverse impact on a subset of the financial industry.

• The Common Sense Economic Recovery Act of 2011, H.R. 1723: This bill would encourage rational and consistent loan classifications, which would strengthen bank balance sheets and improve the oppressive examination environment by establishing common-sense criteria for determining when a loan is performing. It would also stop regulators from assigning non-accrual status to performing loans. The legislation would also require the Financial Stability Oversight Council to conduct a study of how to prevent contradictory guidance on loan classifications and capital requirements from the federal banking agencies.

• A bill to instruct the Federal Deposit Insurance Corporation Inspector General to study the impact of insured depository institution failures, H.R. 2056: This bill would require the FDIC inspector general to study examination and resolution policies that may contribute to the overly harsh exam environment that community banks are facing. ICBA is particularly interested in focusing the study on the effect of paper losses that cause institutions to raise more capital and of commercial real estate loan workouts. ICBA believes that raising awareness of these concerns will change examination practices and give momentum to legislation, such as H.R. 1723, which would directly address these exam problems.

For more information, visit www.icba.org.

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