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Keating calls on federal regulators to help community banks

On Oct. 3, former Oklahoma Gov. Frank Keating sent a letter to all federal banking regulators basically asking them to follow through with action that supports their words. It's something we're asking member banks to join with us and help make the case for these common-sense reforms.

Over the past few months, federal regulators have expressed strong support for community banks. Most recently, that support was evidenced at the community bank program co-sponsored by the St. Louis Fed and CSBS in which Chairman Bernanke emphasized his plans to do what the Fed can to help community banks:

“My colleagues at the Federal Reserve and I ... are committed to crafting supervisory policies and regulations that are appropriately scaled to banks' size and complexity,” he said. “And we have confidence that the remarkable resilience of America's community bankers will enable them not only to survive, but also thrive in the years ahead.”

Keating's letter called on the federal regulators to begin the process of taking specific actions to revitalize the industry. He outlined six specific things that could be done now, without the need for any enabling legislation:

  1. Remove punitive regulation of mortgage servicing assets;
  2. Clearly exempt community banks from the Volcker Rule;
  3. Implement a more robust Ombudsman program in each federal agency;
  4. Simplify and focus call report information;
  5. Allow limited dividend distribution for Subchapter “S” banks to pay taxes on earnings; and
  6. Be more of an advocate for community banks by recognizing the competitive inequality they face from credit unions and the Farm Credit System.

The plan: Working with the ABA and the other state bankers associations, we plan to take the expressions of concern and support for community banking by policymakers and do something about it.

  • Together we are looking for bankers to take up one or more of these six general recommendations and explain to your bank's chief federal regulator how this change will improve your bank's customer experience. Explain how, without this change, your customers will be harmed (because you won't be able to properly serve their needs);
  • Copy your letter to the OBA and to the Oklahoma congressional delegation;
  • These letters do not have to be lengthy; they must, however, be unique to your bank and to your bank's customers;
  • They should focus on the impact they have on your bank's customers and communities.

Here are some points you can think about adapting to your bank's particular circumstances and your letter: (Note: if you would like some help in crafting your letter, don't hesitate to call Roger Beverage at the OBA.)

  1. Federal banking regulators (and your primary federal regulator) have correctly pointed out both the importance of community banks and the challenges they face. Those expressions of support have been very reassuring and are much appreciated.
  2. Now is the time to build on that understanding and begin to take specific, tangible steps to reverse the decline in community banking.
  3. Gov. Keating's letter offers six particular, practical steps that can be done now, without having to wait for Congress to act. They present an exceptional place to begin the process.
  4. Here's what (exempting community banks from the Volcker Rule) means to our customers and how it would positively impact our community:
  • It would enable us to hire people who interface with our customers rather than compliance experts who do not and who merely add costs to our overall operation – costs which will be ultimately borne by our customers;
  • An anecdote or two would be great, as a good, real-life story makes the point understandable and memorable to the policymaker.

5. Offer to work with the regulator in addressing these issues.

In addition, speak up at any outreach meetings you may attend. When you get the opportunity to attend a regulatory or legislative outreach meeting, do so. Speak out on these simple requests and explain how your customers (and voters) will benefit from these changes.

Even though these proposals do not require legislation to be implemented, if we can encourage members of Congress to weigh in on our side, it will help. Bankers will also want to raise these issues in meetings with legislators as well.

The ABA, the OBA and the state bankers associations will be ready to respond with facts and reasoned argument to any objections that may be raised to this or that proposal.

As this effort gains momentum across the country, we'll also need to make our case to the general public. The specific practical information from banker letters will help with that, as will additional information on what this all means to individual bank customers and communities.

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