Regulatory Relief Is a High Priority
By Diane Casey-Landry
How many final rules have the federal banking regulators put out in the past 15 years? Would you say 100? How about 250? Do I hear 500?
The actual number is more than 800.
That works out to an average of one new rule every week of every year for 15 years – and then some.
Each of those rules may have seemed like a good idea at the time. But when you have to deal with their cumulative impact, and run a business, and meet the competition, and serve your community, they add up to a crushing regulatory burden that is killing our industry.
America’s Community Bankers is working the issue of regulatory relief with both the regulators and the Congress – and we are doing so at a time when regulatory relief seems to be one of their priorities.
But we need your voice, too. Community bankers have to be willing to step up and tell their members what excessive regulations mean to them. What does it cost? How much time is involved? How seriously are you contemplating delisting or selling out because of the burden of excessive regulation? Congress needs to hear from you because you open doors no one else can.
Bank Secrecy, PATRIOT Acts
We know that the Bank Secrecy Act and the USA PATRIOT Act are a big part of your regulatory burden.
Anti-money laundering requirements were written to stop terrorists from using the banking system, to protect our security and the integrity of our financial system – all essential purposes. Yet inconsistent interpretation of anti-money laundering regulations and a lack of regulatory guidance have made it increasingly difficult for community banks to meet compliance demands. That has led to an excess of unintended consequences. For example:
• Bank CEOs worry more about anti-money laundering compliance and less about overseeing the performance of the institution and its service to the community.
• Community banks are being pressured by examiners to close accounts of long-time customers because regulators believe these customers present an unacceptable level of compliance risk. Sometimes that affects the only grocery or convenience store in a community.
• Institutions that file thousands of SARs each year are penalized for missing one filing.
• Examiners have told bankers that they will spend more time evaluating BSA compliance than all other aspects of safety and soundness combined.
Former ACB Chairman Curt Hage has warned the regulators that, “Without some form of reasonable relief provided by the Securities and Exchange Commission or the Public Company Accounting Oversight Board, real and unfortunate conclusions for many community financial institutions will likely be dissolution through merger activity, or becoming private enterprises.” Hage is chairman of the ACB Business Partners Inc. board and chairman and CEO of Home Federal Bank in Sioux Falls, S.D.
Maybe the regulators are getting it. William J. McDonough, who chairs the PCAOB, pledged new staff guidance to clarify audit standards. PCAOB planned to devote its June advisory group meeting to a discussion of whether that would be enough, or whether the standard needs to be revised though a rulemaking.
And SEC Chairman William Donaldson has said his agency may also issue new guidance, saying he would be “very disappointed if we didn’t find some things we could do.”
ACB has urged that banks be allowed to meet Section 404 requirements through internal control and attestation requirements in federal banking law.
We did this because our members told us that the law’s requirements have led to costs and burdens that significantly outweigh the benefits.
Moreover, mutual institutions are being forced to fulfill disclosure documents and processes required of publicly held companies.
Community banks understand safety and soundness. But when regulations reach the point that they jeopardize the continuity of an institution, it amounts to policies that are neither safe nor sound for the communities affected. Regulatory burden relief is no longer something to hope for – it is critical to the future success and survival of community banks.
Diane Casey-Landry is president and CEO of America’s Community Bankers (www.acbankers.org).