Bankers Say Regulatory Burden Is Too Heavy
June 15, 2010
Days after the US Senate passed a sweeping financial regulatory reform bill, the American Bankers Association (ABA) warned that the growing regulatory burden is reaching the breaking point for many banks.
"As each new requirement is suggested, there seems to be no consideration of the totality of the burden," American Bankers Association President and CEO Edward Yingling wrote in a letter last week to US Treasury Secretary Timothy Geithner. "This is simply out of control."
While the Obama administration, regulatory agencies, and Congress encourage banks to increase lending, many of the new and proposed rules restrict or reduce the ability to lend, Yingling said. "For example, new consumer disclosure requirements for mortgages are so complex that many small banks are exiting the business."
Fewer banks in business could mean less competition for deposits through money market rates, savings account rates, CD rates, and mortgage rates.
80 New or Expanded Bank Rules
The association says 50 new or expanded regulations have been imposed in the last two years, and the Senate regulatory reform bill includes 30 new or expanded rules. Many of the new rules carry litigation risk, Yingling said, noting that the median-sized bank has 40 employees.
"Many community bank leaders are telling ABA that they simply see no future for their institutions under the mound of regulatory costs they are facing."
Now that the Senate has passed its financial regulatory reform version, the legislation will be combined with a similar House bill passed last year. Among other provisions, both bills call for regulating over-the-counter derivatives, creating a council of regulators to monitor the financial system, creating a consumer protection watchdog agency, and developing a process to prevent more taxpayer bailouts of large institutions.
The reform legislation could go to President Obama to sign into law before July 4.
