Sioux Falls, SD (March 24th, 2016) Today, Independent Community Bankers of South Dakota (ICBSD)1 President & CEO, Greg McCurry, testified before the U.S. Small Business Administration National Ombudsman’s Regulatory Fairness Hearing.
In testimony submitted to the National Ombudsman, McCurry said, “Community banks are exceptional small business lenders. While community banks comprise just 20 percent of the banking industry's assets, they provide 55 percent of the industry's small-business loans. The viability of community banks is directly linked to the success of small business.”
“I cannot stress enough that community banks are small businesses, small businesses that specialize in relationship lending within the communities they serve. When community bank customers succeed and prosper, community banks succeed and communities thrive” McCurry said.
McCurry went on to share items that, if reformed, will allow community banks to better focus on small business customers’ success and prosperity and the prosperity of the communities they serve.
“We are calling on regulatory agencies to provide rigorous and quantitative justification of new rules along with a cost-benefit analysis. The ICBSD supports a process in which regulatory agencies across our government cannot issue notices of proposed rulemakings unless they first determine that quantified costs are less than benefits,” McCurry said. “The analysis must take into account the impact on the smallest community banks and local businesses which are disproportionately burdened by regulation.”
McCurry went on to share, “Community bankers support excluding banks with assets below $10 billion from new small business data collection requirements under Dodd-Frank Section 1071.” He stated, “This provision, which will likely require the reporting of information regarding every small business loan application, will fall disproportionately upon smaller banks that lack scale and compliance resources.”
The last item McCurry shared was the ICBSD’s strong opposition to the Financial Accounting Standards Board’s (FASB) proposal on implementation of the expected credit loss model for loans and investment securities currently under deliberation. “The Office of the Comptroller of the Currency estimates that loan loss reserves on average will increase by 30 – 50% with adoption of the proposed expected credit loss model. Raising reserves will lower overall available credit to small business.”
Community banks are encouraging FASB to consider an alternative approach relying on historical losses for building and maintaining loan loss reserves. As loans and securities become individually impaired, reserve would be increased based on specific measurements of impairment.
In closing McCurry shared, “Regulatory burden has contributed significantly to the decrease of 1,342 community banks in the U.S. since 2010. The number of banks with assets below $100 million shrunk by 32 percent, while the number of banks with assets between $100 million and $1 billion fell by 11 percent.2 A financial landscape with fewer community banks will reduce access to credit for small businesses.”
1 The Independent Community Bankers of South Dakota (ICBSD) was founded in 1983 to serve as the voice for independent community banks throughout South Dakota. ICBSD is the only association that advocates exclusively for community banks. Community banks help create local jobs, support local organizations, pay local taxes, and work to build strong communities.
2 Parsons, Richard J. Bank Think. American Banker, Feb. 16, 2015.
Greg McCurry, President and CEO
Independent Community Bankers of South Dakota
Please contact us on issues related to consumer and small business lending, federal regulatory issues, the economy, housing, tax policy, and other financial services topics. We will provide you with information from the community banker perspective including interviews with ICBSD board members to help you with your story.