Independent Banker - September 2017 - 66

Risks & Rules
TREASURY REPORT
What the Treasury report
means for community banks...
...and how ICBA helped make it happen.
By Kathryn Jackson Fallon
C
ommunity banks have
long been hampered by
regulations on par with
large-cap institutions.
However, some of these
regulations could now be scaled back.
In June, the US Treasury Department,
led by Treasury Secretary Steven
Mnuchin, released a report outlining
recommendations for regulatory relief
in the banking industry. Chris Cole,
ICBA's executive vice president and
senior regulatory counsel, says, " I
think it's the first time in a decade that
Treasury has issued a report about
banks and has not recommended additional
regulation on banks. "
As the Treasury prepared the report,
ICBA had the opportunity to weigh
in. Many ICBA recommendations
were heeded. Here are a few that, if
implemented, would prove especially
beneficial to community banks.
Simplify the capital regime
for community banks
" Treasury recommends that bank
regulators explore exempting
community banks from the risk-based
capital regime implementing the Basel
III standards. "
Exempting community banks from
Basel III capital requirements is
exactly what ICBA recommended.
This would allow for a much simpler
method of assessing the capital
adequacy of community banks.
An exemption from Basel III
for community banks would mean
capital requirements would become
simpler, maybe going back to a more
simplified risk-based system, Basel I,
or scrapping a risk-based system altogether
and using a simple leverage
ratio. ICBA's position has been all
along that Basel III should never have
applied to smaller banks and that it
was a complicated system set up only
for internationally active banks.
Higher thresholds
" Treasury recommends raising the
small bank holding company policy
statement asset thresholds to $2 billion
from the current $1 billion. "
While ICBA would have liked
to see the limit for the small-bank
holding company policy statement
increased to $5 billion or $10 billion,
raising the limit to $2 billion is a
move in the right direction. It allows
banks to have their capital adequacy
measured at the bank-only level and
not have to compute consolidated
capital at the holding company level.
This would allow community banks
to raise debt at the holding company
level and inject it down into the bank,
66 ICBA IndependentBanker September 2017
which is also a good way to bolster
the capital levels of the bank itself.
That rise to $2 billion would capture
quite a few banks. " As asset size
goes up, the number of banks goes
down, " says Cole. More bank holding
companies, those with assets up to
$2 billion, would be able to leverage
their assets more easily-in other
words, borrow more.
Small-business lending
" Simplifying, adjusting or changing
certain financial regulations for
financial institutions serving small
businesses... "
Lending to small business is a vital
way community banks serve the
needs of their communities. It would
be tremendously burdensome for
community banks to collect, compile
and report the voluminous data
required by section 1071 of DoddFrank.
Treasury recommends, as does
Independent Banker - September 2017

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