September 16, 2014


WASHINGTON – U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing held to examine the state of small depository institutions:
Thank you, Mr. Chairman.  This hearing is important because small depository institutions represent the lifeblood of many communities across America, and especially in rural Idaho. 
Yet, small financial institutions are disappearing from America’s financial landscape.  This is in large part due to an ever increasing regulatory burden that small depository institutions face and cannot absorb.  These small entities can only withstand a regulatory assault for so long before considering a merger or consolidation. 
We lost more than 3,000 small banks and more than one-half of credit unions since 1990.  In fact, we lost 85 percent of banks with less than $100 million in assets between 1985 and 2013.  What strikes me as particularly worrisome about that number is that the vast majority of those small banks did not fail.  On the contrary, the rates of failure, voluntary closure and overall attrition were lower for these institutions than in any other size group.  This means 85 percent of good small banks with assets under $100 million are no longer serving their communities, which is alarming.
Not only are we losing small banks, but our regulatory framework is discouraging creation of new banks – only two de novo federal banking charters have been approved since 2009, according to the Federal Deposit Insurance Corporation (FDIC).  I hear from Idaho banks and credit unions that regulatory burden has become so overbearing that small depository institutions can no longer absorb it so they are consolidating, and new ones are not being created.  A streamlining of regulatory requirements is necessary to ensure small depository institutions remain competitive. 
The banking regulators and the National Credit Union Administration (NCUA) have commenced a review of unnecessary, outdated and unduly burdensome regulations, and I look forward to their list of recommendations. 
At our hearing last week, I was encouraged to hear that principals at the banking agencies are committed to making this regulatory review meaningful and impactful.  A main criticism of a similar review completed in 2006 was that the banking regulators subsequently repealed or eliminated only a few substantive regulations.  That must not be the case this time.  Since 2006 alone, we lost close to 1,000 banking organizations. Those that remain need our help in removing unnecessary obstacles. 
I cannot stress enough the importance of this regulatory review – the regulators must not squander an opportunity to make a lasting impact on our regulatory landscape so that another 1,000 institutions do not disappear.
I strongly encourage the agencies to conduct an empirical analysis of the regulatory burden on small entities as part of this review.  Quantifying regulatory cost is not an easy task, but that should not stand in the way of the regulators doing the right thing.  I look forward to hearing from the witnesses what specific fixes should be made so that small institutions in Idaho and other rural communities can keep their doors open and continue to serve local communities.
There is bipartisan support to create a regulatory environment in which small financial institutions can thrive, including several good bipartisan bills.  Last week, Senator Heitkamp said that “too big to fail has become too small to succeed.”  I could not agree more.
There are a few specific bills that help address these concerns.  Senators Brown’s and Moran’s bill to eliminate a paper version of the annual privacy notice currently has more than 70 co-sponsors.  Senators Moran’s and Tester’s CLEAR Act would go a long way to aid community banks, as would Senators Manchin’s and Johanns’ bill on points and fees for qualified mortgages.  Senators Toomey’s and Donnelly’s legislation to increase a threshold for when regulated depository institutions are subject to the Consumer Financial Protection Bureau’s (CFPB) examination and reporting requirements would alleviate a great amount of regulatory burden.  Senators Brown’s and Portman’s bill to allow certain credit unions in the Federal Home Loan Bank System is another such item.
I look forward to working with members on both sides of the aisle to make the necessary common sense fixes to help community banks and credit unions.  I also look forward to working with key stakeholders to get more specifics on what should be done and how it should be done to preserve small depository institutions in America.
Thank you, Mr. Chairman.