Bank Groups' Views Cover Spectrum on SEC Broker/Dealer Proposal, All Want Different Things

WASHINGTON – The community banks are concerned about the “regulatory burdens” the SEC’s broker/dealer exemption proposal will bring forth, the Office of Thrift Supervision wants the inclusion of savings associations, and one bank group is still feeling left out. Both the Independent Community Bankers of America and the OTS wrote the SEC urging it to extend the custody exemption to savings associations. The latter said they are currently performing related duties like their bank cousins and many will not be able to take advantage of the small bank custody exemption due to the conditions placed on size and holding company affiliation, wrote OTS Director James Gilleran. ICBA Regulatory Counsel Christopher Cole wrote Regulation B is still “extremely burdensome, unnecessarily complicated and restrictive, and will prove so costly for banks to implement that it essentially nullifies some of the statutory exceptions.” Cole said without further revision, Regulation B will force many community banks to “discontinue existing services to the detriment of their customers.” “It is ironic that when the banking agencies are attempting under EGRPRA to find ways to relieve the regulatory burden of banks that the SEC has issued a proposal that will substantially increase that burden,” Cole said. EGRPRA or the Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires that federal financial regulatory agencies identify outdated, unnecessary, or unduly burdensome statutory or regulatory requirements. The agencies must then eliminate unnecessary regulations to the extent appropriate. America’s Community Bankers also agreed with ICBA asking that savings associations be treated on parity with commercial banks. The American Bankers Association delivered a 45-page plea citing its concern that many issues have still not been addressed to their satisfaction, particularly the safekeeping and custody and networking exceptions, wrote Sarah Miller, director ABA’s Center for Securities, Trust and Investment and general counsel, ABA Securities Association. “Regulation B as it now stands forces banks to change their existing relationships with their traditional customers and makes serving those customers so much more difficult,” Miller said. Specifically, the ABA is concerned that “marginal improvements” to the trust and fiduciary exception will not do enough to alleviate the “regulatory burdens imposed by the Commission on the banking industry.” Miller also said Regulation B was not intended to regulate bank employee bonus plans. “We see no reason why banks should be prohibited from setting employee performance objectives that encourage employees to grow assets for their institution,” Miller said. The ABA criticized the SEC for what it calls an attempt to “cripple the industry’s ability to grow or even continue its traditional business lines” in regards to custodial relationships. “This is especially true with respect to the Commission’s refusal to allow banks to engage in order taking for any new custodial client that does not have an investment portfolio of $25-$50 million,” Miller wrote. “Without the ability to grow, banks will be forced out of the business.” [email protected]