On September 13, the House Financial Services Committee approved by a 30-26 vote the Financial CHOICE Act, Congressman Jeb Hensarling’s (R-TX) legislative replacement to the Dodd-Frank Act. In his opening remarks, Hensarling claimed that the bill aims to end bailouts, support economic growth, and provide regulatory relief to community banks. House Democrats did not offer amendments to the bill, although many expressed adamant disapproval. Congresswoman Carolyn Maloney (D-NY) claimed that the “deeply disturbing” legislation “would take us back to the regulatory stone age.” Various Democrats referenced the CFPB’s recent enforcement action against a national bank to argue that the Financial CHOICE Act’s attempt to remove the CFPB’s authority over abusive practices was one of many reasons to oppose the bill. Democrats unanimously voted against the legislation, while all but one Republican, Congressman Bruce Poliquin (R-ME), voted in favor of moving the legislation forward.
On September 14, the OCC released its bank supervision operating plan for fiscal year 2017. The plan identifies the OCC’s priority objectives, which include: (i) commercial and retail loan underwriting; (ii) business model sustainability and viability; (iii) operational resiliency; (iv) BSA/AML compliance; and (v) processes to address regulatory changes. Moreover, the plan affirms that the OCC will look at each individual bank’s key risks, and will continue the process of stress testing, both for large banks and for midsize and community banks.
On September 15, the FDIC announced two new resources intended to provide community bankers with information on federal housing programs: the Affordable Mortgage Lending Guide, Part I: Federal Agencies and Government Sponsored Enterprises and the Affordable Mortgage Lending Center. The FDIC released the guide in response to feedback from community bankers, who claimed “they did not understand the wide array of federal housing programs.” The purpose of the resource center, according to the FDIC, is to assist community bankers “[to] compare a variety of current affordable mortgage programs and to identify the next steps if they seek to expand or initiate affordable mortgage lending.” The FDIC plans to release Part II, State Housing Finance Agencies, and Part III, Federal Home Loan Banks, of the guide at a later date this year.
Recently, the White House Council of Economic Advisers issued a report titled “The Performance of Community Banks Over Time.” Seeking to address industry concern that Dodd-Frank regulations have negatively impacted community banks, the report presents research related to bank branching patterns and macroeconomic conditions as “evidence” to the contrary, maintaining that “community banks have remained healthy as the Dodd-Frank financial reform has been implemented.” The report presents the following five key points as indication that community banks “remain strong” under the Dodd-Frank Act: (i) with the exception of smallest community banks, the lending growth rate has increased since the financial crisis in 2010; (ii) evidence fails to suggest that Dodd-Frank led to a decline in the number of community banks across counties; (iii) since 1994, for community banks with assets between $100 million and $10 billion, the average number of branch offices has increased; (iv) the decline in the number and market share of community banks with assets totaling less than $100 million is a result of growth; and (v) a combination of macroeconomic factors, such as low equilibrium interest rates, contribute to “a substantial portion of the drop in new bank entry in recent years.” In closing, the report reasons that the Obama Administration “has taken important steps to ensure that regulatory requirements are implemented in a fair and equitable manner for community banks.”
ABA president Rob Nichols released a statement challenging the report’s findings, claiming a “serious disconnect between [the] report and the daily reality for America’s hometown banks and the communities they serve.” Although Nichols acknowledges that the Dodd-Frank Act is not the only contributing factor causing community banks to close, he suggests that the “more than 24,000 pages of proposed and final rules belies the idea that Dodd-Frank had no impact” and emphasizes that “[c]omprehensive regulatory relief is long overdue for community banks.”
On August 17, CFPB Director Cordray responded to a request, from a 70 senator coalition spearheaded by Senators Donnelly (D-IN) and Sasse (R-NE), that the CFPB further tailor its regulations that may be “unduly burdensome” for community banks and credit unions. In Cordray’s response, he stated that the CFPB is committed to achieving well-tailored and effective regulations within the provisions of Dodd-Frank. Further, Cordray outlined already-in-place exemptions for small creditors, various actions taken to ensure the CFPB’s “commitment” to maintaining effective regulations, and highlighted the Small Business Regulatory Enforcement Act (SBREFA) panel as “just one part of the Bureau’s broader initiatives to address the unique issues facing small financial institutions.” Cordray did, however, note that one of the CFPB’s objectives is to “enforce Federal consumer financial law ‘consistently, without regard to the status of a person as a depository institution.’”