Rural South Dakota is a long way from Wall Street, but communities across our great state are on track to face the kinds of regulations imposed on the monumental financial institutions in New York. Regulations due out in a matter of weeks would unnecessarily subject Main Street community banks to the same complex capital requirements as Wall Street megabanks. If you don’t think that’s going to make a tangible difference that will hurt communities across South Dakota, think again.
But let’s back up. We all know that the recent financial crisis took down some of the largest financial firms and contributed to the ongoing economic downturn. What you might not know is that in response, a body of regulators based in Basel, Switzerland, established new requirements on how much capital reserves these large institutions must hold. The idea is that the more capital they hold on their books, the more secure they will be when a crisis hits. In addition, these “Basel III” rules included complex standards on calculating the risks of a bank’s assets.
It’s not an unreasonable response to a crisis borne by Wall Street. Here’s the catch. When U.S. financial regulators released their plans for implementing these standards, they proposed imposing them universally—even on the small independent community banks that did not contribute to the crisis.
This plan is unreasonable, and dangerous for the financial institutions that serve communities across South Dakota. Community banks maintain the banking industry’s highest capital levels and operate a relationship-based model that recognizes the unique needs of their customers. Imposing complex capital regulations on them will limit the resources they can use to lend and reinvest in their communities, threatening our economic recovery.
If we want to prevent another Wall Street fiasco, we should not force community banks out of business and leave their customers in the hands of the megabanks. Without a thriving community banking industry here in South Dakota, when it comes to our financial options, we won’t be that far from Wall Street.
McCurry, a native of MN and resident of Mitchell, SD, holds a Bachelor of Arts degree in Communications / Marketing from the Minnesota State University, Mankato. Prior to joining the ICBSD as President and CEO, he directed the marketing, sales and government relations efforts at Santel