When Congress last year was debating a regulatory-relief bill for financial services firms, many community bankers felt there was not much in it for them.
So this year community bank-ers have presented Congress with a wish list that includes a lighter regulatory burden and tax breaks for banks with assets of up to $5 billion.
Rep. Jim Ryun, a Kansas Republican, introduced the Communities First Act in May. And though few in the banking industry expect the bill to pass as is, the hope among bankers is that provisions of it will be included in a larger financial regulatory-relief bill expected to be introduced before Congress' July 4 recess.
"If that bill begins to move through the committee and the House, we can attach pieces of our bill to that bill. That at least puts us in the game," said Camden R. Fine, the president and chief executive of the Independent Community Bankers of America.
The ICBA is the driving force behind the bill. Steve Verdier, the group's director of congressional affairs, said the Financial Services Regulatory Relief Act of 2004 - which passed the House but never made it out of the Senate Committee on Banking, Housing, and Urban Affairs - put community banks on notice that they must look out for their own interests.
"The problem with last year's reg-relief bill was that it had very little for the average community banker," Mr. Verdier said.
In testimony before a House subcommittee Thursday, Julie L. Williams, the acting comptroller of the currency, listed a number of features that regulators and bank trade groups would like to see in a new bill.
Some of these features would benefit small banks, but most of them would favor large ones. Examples of such provisions include repealing restrictions on interstate branch start-ups, simplifying dividend calculations, and allowing interest on business checking accounts.
Several ICBA members were in Washington last week lobbying for the Communities First Act. Mr. Fine said one of community bankers' complaints is that tax-exempt competitors - namely credit unions - have an unfair advantage.
"It's not that any one single regulation imposes some unworkable burden," he said. "It is the aggregate weight of all the regulations that is breaking the back of these banks."
Mr. Fine said that since 1990 more than 800 new regulations have been imposed on banks. The USA Patriot Act, passed in 2001 to help thwart terrorism, and the Sarbanes-Oxley Act of 2002, aimed at cracking down on corporate wrongdoing, have made banks' compliance obligations much heavier.
Under the Communities First Act, management of publicly traded banks with assets of up to $1 billion would be exempt from a Sarbanes-Oxley requirement to assess internal controls once a year.
Banks that do not share customer information would be able to skip the annual privacy notice to customers unless there was a change in the privacy policy, and qualified banks with up to $1 billion of assets would be able to file a short-form call report in two quarters each year.
James P. Ghiglieri Jr., the president of the $128 million-asset Alpha Community Bank in Toluca, Ill., said Alpha spends about $150,000 a year on staff and auditing to comply with regulations.
"We are drowning in regulatory-burden costs," Mr. Ghiglieri said.
The bill would repeal the alternative minimum tax for banks with up to $5 billion of assets, and allow a 20% tax credit (a maximum of $250,000 a year) for subchapter C corporation banks with assets below $5 billion. And in communities of 2,500 people or less, income earned on agricultural real estate loans and mortgage loans would be tax-exempt.
Mr. Verdier said bankers realized a regulatory-relief bill was a probability, so they decided to ask for everything and increase their chances of getting more benefits.
"The idea was to come up with an ambitious bill that we could get excited about and not to negotiate with ourselves," he said.
The bill has more than two dozen co-sponsors and has been referred to the House Ways and Means Committee and the Financial Services Committee. Nick Reid, Rep. Ryun's press secretary, said that the more co-sponsors the bill has, the better its chances.
Mr. Verdier said all ICBA state affiliates support the Communities First Act.
"We've got our bankers pounding the halls and calling their representatives, urging them to co-sponsor it," he said.
