Pub. 5 2010-2011 Issue 2

www.nebankers.org 8 Extraordinary Service for Extraordinary Members. I N A RECENT LETTER TO TREASURY Secretary Timothy Geithner, I pointed out the dramatic growth in regulatory burden during the past two years, as well as how much the burden will expand under financial regulatory reform. We hope the admin- istration understands the big picture in this grim message. Traditional banks, which are working to pull their com- munities up from the worst financial crisismost of us have ever encountered, are under siege. Traditional banks’ regulatory bur- den has reached the limit, I told Geith- ner in my letter. This burden must be addressed if the administration wants such banks to both increase lending and continue to support communities, business customers, and consumers. Banks already were subject to thou- sands of pages of regulations before the financial crisis, but that regulatory burden continues to grow, I said. During the past two years, 50 new or expanded regulations have been imposed. The Senate’s versionof the regulatory reform bill would impose another 30 new or expanded regulations. I provided the secretarywitha list of thesenewburdens. Little thought is given to the net ef- fect of this trend. “There seems to be no consideration of the totality of the burden,” I said. “It is now reaching a breaking point. Many community bank leaders are telling ABA that they sim- ply see no future for their institutions under the mound of regulatory costs they are facing.” In fact, as I was working on this column, a community banker called and told me that the decision had been made by his bank to either sell ormerge simply because they thought they were too small to handle the crushing regulatory burden and other rules from Washington. I have heard that story many times in recent months. Looked at another way, as we ex- plained in our letter, the median bank in the United States has less than 40 Edward L. Yingling , President & CEO, American Bankers Association employees. These 80 new regulatory requirements mean there are two new requirements for every employee in the median-size bank. A number of these new requirements contain very signifi- cant litigation risk. “This is simply out of control,” we said. Even before regulatory reform, the median community bank already had 50 pages of consumer regulation for each employee. That also means half of the banks in our country have more than 50 pages for each employee. Meanwhile, leaders throughout the administration, Congress, and the regulatory agencies continue to call on banks to lend more while simultane- ously increasing their regulatory bur- den, which makes it harder for banks to lend. For example, new disclosure requirements for mortgages are so complex that many small banks are ex- iting the business. Is this good policy? “If the administration truly wants to enable traditional banks to increase lending and to continue to support their communities, business custom- ers, and consumers, the impact of the aggregate regulatory burden must be addressed,” I said. The growing regulatory burden is an economic threat to the communities and customers served by traditional banks. Combined, it’s a threat to our national economy and the recovery that banks are working so hard to support. This is a case where policymakers cannot have it both ways—a vibrant economy and continued regulatory pile-on. Z Washington Update The Regulatory Burden Tipping Point There’s no question that the regulatory burden traditional banks must shoulder is getting increasingly heavy. Indeed, reg burden is reaching a point where it’s literally becoming too much for traditional banks to bear. visit us online! www.nebankers.org Reach Ed Yingling by e-mail at ed.yingling@aba.com.