State banking regulators appeared before the U.S. Senate Committee on Banking, Housing and Urban Affairs last week to recommended regulatory reforms for smaller, less complex banks that do not pose systemic risk.
Speaking on behalf of state regulators, Charles Cooper, commissioner of the Texas Banking Department and immediate past chairman of the Conference of State Bank Supervisors, called on Congress to abandon a one-size-fits-all approach to bank regulation and, instead, tailor regulations to different kinds of banks.
Cooper recommended that lawmakers adopt an activities-based definition for community banks, which lawmakers and regulators can use to exempt smaller banks from regulations aimed at larger banks.
Cooper also suggested reducing the complexity of capital rules for smaller banks and exempting community banks that retain mortgages in portfolio from certain regulations. He also recommended improving the transparency and timeliness of fair lending supervision.
While community banks provide about 45 percent of small loans to U.S. businesses and three-fourths of agriculture loans, they are “disproportionately burdened by oversight that is not tailored to their business model or activities,” Cooper said.
“I have seen many swings of the regulatory pendulum. Extreme swings to either side are wrong. We must all seek ways to ensure a balanced approach,” Cooper concluded.