WASHINGTON — Sen. David Vitter, R-La., said Wednesday that his bill with Sen. Sherrod Brown, D-Ohio, would not institute new capital requirements for community banks, one of several significant changes made to the legislation designed to end "too big to fail."
He described several critical changes to the Brown-Vitter bill compared to a draft leaked to the media earlier this month, including how capital standards would be tiered for institutions of different sizes.
The official bill, which the senators will introduce at a press conference this afternoon, will include a 15% capital requirement for institutions with $500 billion of assets and an 8% requirement for institutions with between $50 billion and $500 billion, Vitter said. The Louisiana Republican said the country's smallest institutions would not be held to new capital standards, citing existing rules in place for them.
"For banks below $50 billion we're silent because we think the present rules and practices have all of you in the very safe range by that standard, and would really in almost all cases be above the 8% that we set for regional and mid-sized banks," Vitter told attendees at the Independent Community Bankers of America conference.
Critics had warned that the earlier draft version of the legislation, which included a 15% requirement for institutions with more than $400 billion and a 10% requirement for all other institutions, would fail to earn the support of community banks because they were forced to increase their capital under such a regime.
But the official version of the bill earned an early endorsement from Camden Fine, president and chief executive of the ICBA on Wednesday morning.
"ICBA strongly endorses this legislation, and urges all community banks nationwide to join the association in advocating for the passage of this legislation," he said. "We're eager to get a bill number so we can grassroots this thing."
Vitter also laid out half a dozen provisions in the bill designed to reduce the regulatory burden on smaller banks, such as amending the definition of rural in the Consumer Financial Protection Bureau's qualified mortgage rule so that it matches the Department of Agriculture's definition and establishing a bank examination appeals process.
He also described the major goals of the legislation, which he said is focused on leveling the playing field for all banks, regardless of size.
"The goal [of the bill] is simple. The goal is to even that playing field, to not have size an inordinate factor and the reason for in essence and subsidy and a cost of funds competitive advantage versus all other institutions like yours," Vitter said. "And the goal is to create a cushion, a cushion against disasters and a cushion for taxpayers."