The Independent Community Bankers of America celebrated new Senate legislation introduced Wednesday by the bi-partisan duo of Sherrod Brown (D-Ohio) and David Vitter (R-La.) that would help eliminate the threats posed by the “too-big-to-fail” institutions of more than $500 billion in assets.
The Terminating Bailouts for Taxpayer Fairness Act of 2013, S. 798, seeks to end federal subsidies and funding advantages for large banks that foster incentives for risky behavior and put taxpayers at risk, its sponsors said.
It would also require regulators to abandon Basel III capital requirements for banks with fewer than $50 billion in assets and create a new capital framework.
“ICBA applauds Senators Brown and Vitter for advancing the debate to bring balance back to the financial services marketplace,” said Bill Loving, ICBA chairman and president and CEO of Pendleton Community Bank in Franklin, W.Va.
“By imposing equity capital guidelines that are appropriately scaled to the size, scope and risk of the too-big-to-fail institutions, this legislation will reduce systemic risk, protect taxpayers and put our nation's community banks on a competitively balanced playing field,” Loving said.
The bill comes as the ICBA kicks off its annual Washington Policy Summit in which congressional leaders speak to some 1,000 bankers before they storm the hill to lobby lawmakers. The summit runs through Thursday at Washington's Omni Shoreham Hotel.
The legislation also includes regulatory relief measures for community banks that expands the definition of “rural” for purposes of the qualified mortgage definition and addresses two items on the credit union regulatory relief wish list: the elimination of the annual privacy policy mailing and an improved exam appeals process.
There was no mention of credit unions anywhere in the bill's text.
John McKechnie, partner at the Washington lobby and strategy firm Total Spectrum, said he had reviewed the bill and said it could be a positive move for credit unions if it becomes a vehicle for regulatory relief for both small banks and credit unions.
“However, if it simply focuses on banks, I think it will be a major disappointment,” he said, adding, “and credit unions will have to make sure Congress understands that we have a need for regulatory relief as well.”
McKechnie added that if Congress relieves banks of Basel III requirements, credit unions should also be granted reform that includes supplemental capital.
CUNA Senior Vice President of Legislative Affairs Ryan Donovan echoed that sentiment, saying legislation to address community bank capital standards should be paired with legislation to address credit union capital issues, particularly the ability of credit unions to accept supplemental forms of capital.
NAFCU Vice President of Legislative Affairs Brad Thaler fired off a letter to Brown and Vitter earlier this week in anticipation of the bill, also urging the two to recognize the need for risk-based capital for credit unions.
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