New Bank Regs Cost You: The DC 'Mind' Bank-Killers

It's the same old story.  Large banks--the Too Big To Fail bunch--can spread the cost of regulation over their large asset-base.

Small banks?  Well, they're screwed.

Wesenberg [a Wisconsin credit union president] decried what she called a "crisis of creeping complexity" from the many new rules, which she criticized as "costly" and "confusing" without doing much good.

"We would prefer to spend our resources on promoting our mission of financial literacy and the development of new products to serve the needs of our members," she said.

Wesenberg said the credit union's vice president of lending dedicates about one-third of her time wading through regulatory changes.

Another Wisconsin banker provided more specific charges:

Reinhart warns that the Consumer Financial Protection Bureau is an area of concern since the new agency's rules will impact community banks.

"The CFPB should not implement any rules that would adversely impact the ability of community banks to customize products to meet customer needs," he said.

Reinhart believes examiners who evaluate the structure of financial institutions are over regulating by requiring write-downs or re-classifications on performing loans based on the value of the collateral; disregarding the borrowers ability to pay; placing loans on nonaccrual even though the borrower is current; and moving the capital goalposts.

"Community bankers nationwide have reported that bank regulators are often demanding significant capital increases above the minimum regulatory levels established for well capitalized banks," Reinhart said. "For example, some examiners are requiring banks to maintain minimum leverage ratios as high as 8% to 9% (versus the 5% required by regulation) and minimum Tier 1 risk-based ratios as high as 10% (versus the 6% required by regulation). To bankers, the process appears arbitrary and punitive."

To the DC Mind, small banks (and small towns) are irrelevant.  Not 'nuff lobbying money, for openers.