Rep. Doug Bereuter, R-Neb., has introduced legislation intended to ease regulation of community banks. Recently, he discussed the Comprehensive Community Bank Burden Reduction Act at a hearing of the House Banking subcommittee on finanacial instituation. These excerpts were prepared by Claudia Cummins of Medill News Service.
The goal of the legislation is to reduce and streamline the excessive and duplicative reporting requirements and mindless regulatory red tape wherever it can be done without sacrificing safety and soundness. Today, I would like to outline my reasons for introducing legislation.
1. Recent laws are putting both the banks and their regulators in a regulatory straitjacket.
2. Overzealous examinations: I was aghast when I heard that an institution in a small, farmbased Nebraska community, with only $16 million in assets, underwent a weeklong CRA exam with six examiners.
3. Legislation is needed not only to save money for banks, but also to save money for taxpayers and the bank's customers.
I fear that because Congress has dictated the regulatory process in great detail, the regulartors have lost their flexibility and ability to pay greater attention to the problem areas. Rather, it appears Congress should be acting to rein in the overzealous or mindless regulator.
It is clear that unneeded regulation and paperwork is costing bank customers.
The impact on consumers or customers comes in two froms: either a reduction in the number of services offered, or in higher fees for those services. A reduction in services is a very real concern for rural areas. For example, we have already seen small, community banks discontinue offering adjustable-rate mortgages simply because of the number of regualations dictating in detail how that product is to be offered.
Potential for Lending
According to the American Bankers Association, banks could support $20 billion to $30 billion of additional lending each year if only 25% of the resources now spent on compliance could be redirected to bank capital.
4. In an effort to ensure sound operation of the industry, Congrees is also increasing micromanaging the regulatory or examination process.
The Federal Deposit Insurance Corp. Improvement Act, for example, dictates:
* Criteria for membership on audit committees.
* Additional limits on loans to bank officers.
* Standards for day-to-day management of a bank.
* Compensation standards for healthy banks.
While my bill provides relief, in some cases, for instituations under a certain asset size only those institutions that are healthy would be able to qualify for the relief.