ICBA Plan for Prosperity

ICBA’s Plan for Prosperity: A Regulatory Relief Agenda

Community banks and thrifts play a vital role in ensuring the economic recovery reaches communities of all sizes across the country. ICBA’s Plan for Prosperity provides targeted relief from the regulations stunting the economic recovery. Relieving community banks from excessive, redundant and costly regulatory burdens will allow community banks to thrive by doing what they do best—serving and growing their communities.

The Plan for Prosperity is not a single bill, but a set of legislative priorities positioned for advancement in Congress. The provisions could be introduced in Congress individually or collectively or configured in whatever fashion suits interested members of Congress. The plan is a flexible, living document that can be adapted to a rapidly changing regulatory and legislative environment to maximize its influence and likelihood of enactment. Provisions of the plan include:

Mortgage Reform Exemptions to Support the Housing Recovery:

  • Key provisions would:
    • Provide “qualified mortgage” safe harbor status for loans originated and held in portfolio for the life of the loan by banks with less than $10 billion in assets, including balloon mortgages.
    • Exempt banks with assets below $10 billion from escrow requirements for loans held in portfolio.
    • Increase the “small servicer” exemption threshold to 20,000 loans from 5,000.
    • Reinstate the Financial Institutions Reform, Recovery and Enforcement Act exemption for independent appraisals for portfolio loans of $250,000 or less made by banks with assets below $10 billion.
  • Providing community banks relief from new mortgage regulations will help ensure they are not driven out of the mortgage market, making it harder for Main Street consumers to get a home loan and slowing the nation’s housing recovery.

Reduce Annual Privacy Notice Redundancies To Cut Paperwork:

  • Eliminate the requirement that financial institutions mail annual privacy notices even when no change in policy has occurred. Financial institutions would still be required to notify their customers when they change their privacy policies.
  • The redundant notices provide no useful information to customers and are a needless paperwork expense for community banks.

Ease Municipal Advisor Registration Burdens To Help Serve Local Governments:

  • Exempt community bank employees from having to register as municipal advisors with the Securities and Exchange Commission and Municipal Securities Rulemaking Board, which would require community banks to be examined by the SEC to continue providing traditional banking services to municipalities.
  • Community banks have always provided traditional banking services such as demand deposits, certificates of deposit, cash management services, loans and letters of credit to the municipal governments of the communities they serve. Community banks provide these services under close supervision by state and federal bank regulators.
  • Municipal advisor registration and examination would pose a significant expense and regulatory burden for community banks without enhancing financial protections for municipal governments.

Strengthen the Industry’s Voice with an Assistant Secretary for Community Banks:

  • Economic and banking policies have too often been made without the benefit of community bank input.
  • Creating an assistant secretary for community banks at the Treasury Department would ensure that the nearly 7,000 community banks across the country, including minority banks that lend in underserved markets, are given appropriate and balanced consideration in the policymaking process. 

Reform the CFPB To Ensure More Balanced Consumer Regulation:

  • Change the governance structure of the Consumer Financial Protection Bureau from a single director to a five-member commission and strengthen the Financial Stability Oversight Council’s review of CFPB rules by changing the vote required to veto a rule from two-thirds vote to a simple majority, excluding the CFPB director.
  • Commission governance would allow for a variety of views and expertise on issues before the CFPB, build in a system of checks and balances that would be absent under a single director, help ensure the actions of the CFPB are measured and non-partisan, and result in balanced, high- quality rules and effective consumer protection. 

Improve Accountability in Bank Exams with a Workable Appeals Process:

  • The trend toward oppressive, micromanaged regulatory exams is a concern to community bankers nationwide. ICBA’s Plan for Prosperity would create an independent body to receive, investigate and resolve material complaints from banks in a timely and confidential manner.
  • Holding examiners accountable and preventing retribution against banks that file complaints will help ensure balance in the examination process and free up community banks to lend in their communities.

Offer Relief from Accounting and Auditing Expenses for Publicly Traded Institutions:

  • Increase from $75 million in market capitalization to $350 million the exemption from internal control attestation requirements. Because community bank internal control systems are monitored continually by bank examiners, they should not have to sustain the unnecessary annual expense of paying an outside audit firm for attestation work.
  • This provision will substantially lower the regulatory burden and expense for small, publicly traded community banks without creating more risk for investors.
  • Separately, due to an inadvertent oversight in the Jumpstart Our Business Startups Act, thrift holding companies cannot take advantage of the increased shareholder threshold for deregistering with the SEC. Congress should correct this oversight by allowing thrift holding companies to use the new 1,200 shareholder deregistration threshold.

Support Mutual Banks with New Charter and Dividend Rules:

  • Allow the Office of the Comptroller of the Currency to charter national mutual banks to provide flexibility for these institutions to choose the charter that best suits their needs and the communities they serve.
  • In addition, mutual holding companies that have public shareholders should be allowed to pay dividends to their public shareholders without having to comply with numerous “dividend waiver” restrictions as required under a recent Federal Reserve rule. The rule makes it difficult for mutual holding companies to attract investors to support their capital levels.
  • Easier payment of dividends will ensure the viability of the mutual holding company form of organization, benefiting the communities they serve.

Require Rigorous and Quantitative Justification of New Rules:

  • Provide that financial regulatory agencies cannot issue notices of proposed rulemakings unless they first determine that quantified costs are less than quantified benefits.
  • The cost-benefit analysis must take into account the impact on the smallest banks, which are disproportionately burdened by regulation because they lack the scale and the resources to absorb the associated compliance costs.
  • The agencies would be required to identify and assess available alternatives, including modifications to existing regulations, and ensure that proposed regulations are consistent with existing regulations, written in plain English, and easy to interpret.

Support Additional Capital for Small Bank Holding Companies:

  • Require the Federal Reserve to revise the Small Bank Holding Company Policy Statement, a set of capital guidelines that have the force of law.
  • Applying the policy statement to both bank and thrift holding companies and increasing the qualifying asset threshold from $500 million to $5 billion would make it easier for small bank holding companies to raise additional capital by issuing debt.
  • This will help ease and simplify capital requirements for small bank and thrift holding companies.

Cut the Red Tape in Small-Business Lending:

  • Exclude banks with assets below $10 billion from new small-business data-collection requirements.
  • Requiring small community banks to publicly report this information would make personally identifiable information readily available in small communities across the country. Data collection and reporting for the government is a major burden for community banks, and making that information public could violate privacy.

Facilitate Capital Formation:

  • Small Business Subchapter S Reforms
    • Subchapter S of the tax code should be updated to facilitate capital formation for community banks, particularly in light of higher capital requirements under the proposed Basel III capital standards.
    • Shareholder Limit: Increase shareholder limit for S Corporations to 200 from 100.
    • Preferred Stock: Subchapter S corporations should be allowed to issue preferred shares.
    • IRA Shareholders: Subchapter S shares, both common and preferred, should be permitted to be held in individual retirement accounts (IRAs).
    • These changes would better allow the nation’s 2,300 Subchapter S banks to raise capital and increase the flow of credit.
  • Net-Operating-Loss Carry Back
    • Extend the five-year net-operating-loss (NOL) carry-back through 2014 for community banks with $15 billion or less in assets.
    • Allowing these community banks to spread out their current losses is countercyclical, would support community bank capital and lending during economic downturns, and would help these institutions redirect capital back into their communities.