Reg Relief Pitched As Way To Help Small Banks, CUs

Register now

Key lawmakers made it clear last week that a regulatory relief bill to be introduced in Congress over the next few weeks will focus on helping small banks and credit unions.

"Regulatory burden particularly falls on smaller banks and credit unions," Rep. Jeb Hensarling, the Texas Republican who is drafting a regulatory relief bill, told members of the House Financial Services Subcommittee on Financial Institutions during a hearing last week.

But major impediments-similar to ones that doomed last year's bill-arose during last week's hearing, where the powerful banking lobbying said they will oppose any bill to ease regulatory burden on credit unions, even if it means destroying their own chances for Reg Relief.

"We are unalterably opposed to the credit union industry's new proposal to expand chartering powers," Terry Jorde, president/CEO of CountryBank USA, Cando, N.D., told lawmakers on behalf of the Independent Community Bankers Association, just two weeks after the ICBA succeeded in getting its own Reg Relief bill introduced that would deliver billions of dollars in new tax breaks for community banks.

Separately, representatives of the American Bankers Association, which opposed last year's Reg Relief bill solely because of its credit union provisions, told The Credit Union Journal they will probably oppose this year's version as well for the same reason, but reserved judgment until a formal bill is introduced.

CUNA Chairman Dick Ensweiler, who testified on behalf of credit unions during last week's hearing, rejected suggestions that the credit union lobby meet with the bankers to discuss a compromise bill that both parties could support.

But leaders of the committee made it clear that credit unions and community banks will remain the focus of a Reg Relief bill, which passed the House last year but was never voted on by the Senate, partially because of lukewarm support by the bankers. "Credit unions are one of the most highly restricted and regulated institutions in financial services in the country," said Rep. Bernard Sanders, the Vermont Independent, who co-sponsored the CU Regulatory Improvements Act, which would do many of the same things a Reg Relief bill would do for credit unions.

Hensarling said a bill he is drafting with Rep. Dennis Moore, a Democrat from Kansas, is likely to be similar to last year's bill, which included 14 provisions for credit unions.

Ensweiler, president of the Texas CU League recommended that the lawmakers include last year's credit union provisions, as well as NCUA's proposal to institute a risk-based capital system for credit unions; and to change the definition of net worth for credit unions to allow them to continue "pooling," or combining their net capital after mergers, something the Financial Accounting Standards Board is preparing to ban.

Among the provisions that were included in last year's version of the bill:

* Allowing credit unions to retain their select groups after converting to community charters.

* Allowing federal credit unions to provide limited services, including check-cashing and wire transfers, to non-members within their fields of membership.

* Raising the ceiling on member business loans by exempting religious-based loans from the ceiling.

* Allowing NCUA, instead of Congress, to set credit union limits on loan maturities and permissible credit union investments.

* Allowing credit unions to become landlords, to lease space, in underserved areas.

* Requiring that at least 20% of members vote on proposals to convert to mutual savings banks.

* Allowing privately insured credit unions to become members of the Federal Home Loan Bank System

CUNA also made some new recommendations, including:

* Allowing community charters to continue adding members from groups that were part of their FOMs but they were forced to abandon after converting to community charters.

* Allowing credit unions to serve underserved areas with just an ATM and no branches.

* Eliminating the statutory requirement that only one member of the three-person NCUA Board can have credit union experience.

Bob Marquette, president of 1st FCU, Mechanicsburg, Penn., who appeared on behalf of NAFCU, said NAFCU supported a Reg Relief bill that will help credit unions "better serve their members and meet their needs in a dynamic marketplace."

For reprint and licensing requests for this article, click here.