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SNL Financial: Regulators pressed on Durbin Amendment

Lawmakers press regulators on interchange, small bank reg pain 

By Robb Soukup
Top regulatory officials attempted to reassure Washington lawmakers Feb. 17 that elements of the Dodd-Frank Act will not disadvantage smaller community banks.
Speaking at a hearing before the Senate Banking, Housing and Urban Affairs committee, both FDIC Chairman Sheila Bair and Federal Reserve Chairman Ben Bernanke said they were taking pains to ensure that smaller banks are not affected more than competitors as regulators work out a new regulatory infrastructure.
"It's very important to minimize the excess regulatory burden on these institutions," Bernanke said, pointing to efforts by the Fed to "institutionalize" its efforts to do so. He said the central bank has established a special committee that looks only at smaller banks to make sure rules written for the industry do not represent too big of a handicap for smaller banks. He also referenced a community bank council that meets with the Fed and said "We're trying to reach out and understand the particular problems."
Of particular concern to members of the committee were rule changes governing debit interchange fees that members of the banking industry have opposed. It was one area where both Bernanke and Bair, despite their previous statements, acknowledged that changes to interchange rules could affect community banks negatively despite an exemption that will be written into the rule. "We're not certain how effective that exemption will be," Bernanke admitted.
"I would also share Chairman Bernanke's concerns about the effectiveness of the interchange rules and statutory provisions to truly protect community banks, particularly if the networks are not required to have a two-tiered pricing structure so community banks can continue to charge the higher fees," Bair added.
Some senators were not convinced by the regulators, however. Sen. Bob Corker, R-Tenn., said "I know you're being diplomatic, but it seems to me that it's an impossibility that if a rate is set for the larger institutions, it's not going to impact the smaller institutions … there's no doubt our smaller institutions will be impacted."
Note:  Reprinted on our Web site with the permission of SNL Financial LC, a supplier of information to the OBA and to OBA-member banks.  Robb Soukup is a writer for SNL Financial.

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