Ensuring regulations are effective and tailored is common sense and conducting periodic reviews is good government. More so, reforming regulations that inhibit the ability of banks to serve customers is critical. Such anti-customer regulations exist now and make it difficult or impossible to provide loans and other financial services to groups including small businesses, low-income individuals, rural residents, the recently retired and people who recently became employed. In many cases, banks would love to make those loans, but are kept from doing so by overreaching government restrictions.
The volume of regulation is staggering. The 2,300-page Dodd-Frank Act added 390 new bank regulations (itap not done yet) comprising 24,000 pages of new regulations — 8 feet of paper on top of an already heavily regulated industry. Not only is a review warranted, it is imprudent not to conduct a thorough audit of these rules to identify their attributes or negative impacts.
The pendulum has swung too far and the compounding effect of these regulations is hurting customers, communities and our economy by restricting banks’ ability to serve them. In many cases, the regulations have disparately impacted community banks, not their intended target: Wall Street. The cost and complexity of complying with the glut of new rules is pressuring the industry to consolidate, which further hurts customers. A vibrant financial services system needs and relies upon banks of all sizes and today in the U.S.; one bank closes its doors every day due to expensive regulatory compliance.
Colorado bankers have long advocated for meaningful reform of Dodd-Frank rather than wholesale repeal, so that community banks aren’t continually crushed by one-size-fits-all regulation. Specifically, we support the TAILOR Act by Rep. Scott Tipton, R-Colo., which directs federal bank regulators to consider a bank’s risk profile and complexity and requires them to “tailor” their action. The goal is to remove the overwhelming regulatory load and compliance burden where it need not apply, such as when the bank isn’t involved in that activity. Colorado’s other member of the House Financial Services Committee, Democratic Rep. Ed Perlmutter, co-sponsored this bill last year, creating bipartisan support.
Itap our hope this legislation and the administration’s review will receive bipartisan support. We encourage lawmakers to be open-minded and not respond reflexively with predictable public statements about protecting Wall Street. When their sole focus is on Wall Street, they lose sight of the several thousand community banks serving customers and contributing to the economic vitality of our communities. It is of utmost importance that the regulations we put in place effectively protect consumers while allowing banks the unfettered ability to judiciously extend to them the credit they need and deserve.
Don A. Childears (cbapresceo@coloradobankers.org) is president and CEO of the Colorado Bankers Association.
