WASHINGTON While many small banks are hoping Congress will grant regulatory relief this year, mutual institutions are seeking two specific changes they hope can bolster their struggling business.
Rep. Keith Rothfus, R-Pa., is set to introduce bills on Tuesday that would give certain thrifts the opportunity to make more commercial and consumer loans, as well as permit them to raise capital by selling investment certificates.
The first bill has already earned a nod from Comptroller of the Currency Thomas Curry, who said Monday that he supported more charter flexibility for mutual thrifts.
"I strongly believe federal thrifts should be able to adjust their business models," said Curry during the American Bankers Association's Mutual Community Bankers Conference here. "We've had conversations with several members of Congress on this issue and the results have been encouraging We'll continue to raise it as long as it takes."
Curry said the agency opposes the second bill, which would permit mutual banks to raise supplemental capital. At present, mutual thrifts can only raise capital through retained earnings. Curry said the OCC does not oppose the concept behind the bill, but fear that as currently structured it might not fully comply with capital standards under Basel III.
The Rothfus bills represent a dialing back of mutual thrifts' legislative ambitions from the last Congress. Rothfus introduced a bill in 2014 that would let mutual raise supplemental capital and establish a national mutual bank charter.
After the bill died in committee, banking executives and lobbyists rethought their strategy. They concluded the charter proposal was a longshot and that the smart play was to focus on initiatives with a more realistic chance of passage.
"We think we don't have that many bites at the apple," said Richard E. Holbrook, chairman and chief executive of $9.4 billion-asset Eastern Bank in Boston on Monday. "A wish-list approach is simply not realistic If you ask for too much, you get nothing."
Proponents have had "great success" lining up support for the bill providing mutuals with greater lending flexibility, but "less so on" on the capital legislation, according to Brian Ryckman, Rothfus' legislative counsel, who also spoke at the conference. Even so, Ryckman said Rothfus intends to introduce the bills together and will push Congress to act on them together.
The first bill would create an entity called a covered savings institutions, which would be given the same rights as national banks without having to switch charters. The move would essentially free thrifts that pursued the covered-savings-institution option from existing restrictions that limit the amount of commercial and consumer lending they can make.
According to banking lobbyists, one of the major virtues of the legislation Rothfus plans to introduce is that it does not involve amendments to the Dodd-Frank Act. President Obama has numbered Dodd-Frank among his signature accomplishments, so "Democrats are going to get immediately skeptical" of schemes seeking to amend it, said Jeff Quayle, senior vice president and general counsel at the Ohio Bankers League.
The mutual industry could use a win in Congress. Mutual thrifts remain in the grip of a decades-long decline. Four years ago, according to ABA, there were a total of 655 mutual thrifts holding assets of $273 billion. As of Dec. 31, 2014, those numbers had shrunk to 556 thrifts and $249 billion of assets, and they are likely to fall further. According to ABA's annual Mutual Bank Survey, which was released Monday, two-thirds of the 76 institutions surveyed considered merging as a strategic option.