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Community-Bank Regulatory Relief Passes the U.S. House

This week the United States House of Representatives passed legislation to bring much-needed regulatory relief to the nation’s community banks. The Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) is a carefully constructed bipartisan bill that includes common-sense improvements to financial regulation that will allow community banks to better serve their customers and communities. For consumers it will open the door for more creditworthy borrowers and businesses, and will contribute to local economic growth and job creation. Here is what it means for your bank.

Community banks are the economic lifeblood of local communities. While holding less than 20 percent of the nation’s banking assets, community banks fund more than 60 percent of small-business loans and more than 80 percent of U.S. agricultural loans. Further, community banks operate in many areas where large banks do not, serving as the only physical banking presence in nearly one in five U.S. counties, according to the FDIC.

The 258-159 bipartisan vote in the U.S. House yesterday was preceded by a 67-31 bipartisan vote in the U.S. Senate in March. Those members of the Illinois Congressional Delegation voting in favor of this common-sense regulatory relief for community banks were: Mike Bost (R-12th), Danny Davis (D-7th), Rodney Davis (R-13th), Bill Foster (D-11th), Randy Hultgren (R-14th), Adam Kinzinger (R-16th), Darin LaHood (R-18th), Peter Roskam (R-6th), Bradley Schneider (D-10th), and John Shimkus (R-15th). The legislation is now headed to the President’s desk for his signature.

“This bipartisan vote in the House is another important step toward achieving a tiered regulatory system that appropriately differentiates between local community banks and the Wall Street megabanks. This is the best opportunity we’ve had in over a decade for meaningful regulatory relief to allow community banks to better serve their customers and communities. We look forward to the President signing this legislation into law,” said CBAI President Kraig Lounsberry.

Beneficial provisions in this legislation for community banks include:

  • Granting “Qualified Mortgage” (QM) status for portfolio mortgage loans at most community banks;
  • Increasing exemption thresholds for Home Mortgage Disclosure Act (HMDA) reporting;
  • Exempting certain community-bank loans from escrow requirements;
  • Simplifying community-bank capital requirements;
  • Increasing eligibility for a short-form Call Report to restore proportionality to quarterly reporting;
  • Expanding eligibility for the 18-month regulatory-examination cycle to more community banks;
  • Easing appraisal requirements to facilitate mortgage credit in local communities;
  • Exempting most community banks from the Volcker Rule;
  • Expanding access to the Federal Reserve’s Small Bank Holding Company Policy Statement to help more community banks build capital; and
  • Improving regulatory treatment of reciprocal deposits and certain municipal securities.

CBAI worked closely and tirelessly with both Democrats and Republicans in Congress, and the Independent Community Bankers of America (ICBA), to help to pass this important legislation which provides long-overdue, well-deserved and meaningful regulatory relief to Illinois community banks. CBAI extends its thanks to all community bankers who engaged in the grassroots lobbying process to enlighten their lawmakers and encourage their support.

May 22, 2018