July 02, 2010


REDUCING SYSTEMIC RISK – Community banks benefit when large banks pay for the risks they create to the system.
  • Advance Warning System: Creates a systemic-risk regime that would rein in the size and scope of large, interconnected financial institutions. 
  • Tougher Supervision of Large, Interconnected Financial Companies: Large bank holding companies (those with over $50 billion in assets) and systemically important nonbank financial companies will face heightened risk-based capital, leverage, liquidity, and other prudential standards for the risks they pose to financial stability.  These requirements will not apply to community banks.
  • Tougher Capital Standards for Large Financial Companies:  Capital requirements for large bank holding companies going forward must be at least as strict as the standards that exist for community banks today.  Small bank holding companies (those with under $15 billion in assets) will be allowed to continue counting their existing trust-preferred investments towards capital.
    Tougher Derivatives Regulation for Large Financial Companies:  Dealers and major participants in the derivatives market will face clearing and exchange trading requirements, while the SEC and CFTC will have the authority to exempt small banks, savings associations, farm credit institutions and credit unions from these requirements.
  • Ending Too Big to Fail Bailouts:   The FDIC will have authority to liquidate failing systemically dangerous institutions.  Large financial companies, not community banks, will be on the hook for any shortfall in liquidating a large, interconnected financial company.
DEPOSIT INSURANCE – Community banks benefit from a stronger Deposit Insurance Fund and fairer assessments
  • Expanded Deposit Insurance:  Making the $250,000 limit permanent will increase public confidence in deposit insurance and better enable community banks to serve their communities.
  • Helping Community Banks Support Small Business:  Extending the guarantee on the full balance of noninterest bearing transaction accounts (that is, business checking accounts) for two years will increase the confidence of small businesses that their payroll and other operational accounts are secure in their local banks.  This will help foster economic recovery.
  • Strengthening the FDIC Insurance Fund:  Large banks (those with assets over $10 billion) must pay for the increase in the FDIC’s fund from 1.15 percent to 1.35 percent of insured deposits.  Community banks will not have to pay for the increase but will benefit from the added resources in the fund, which will help protect them from future premium increases.
  • Fairer Assessments: The FDIC will change the way it charges banks assessments to reflect the size of companies’ liabilities, easing the burden on community banks.
CONSUMER PROTECTION – Community banks benefit when nonbanks play by the same rules and regulators consider the impact of rules on small institutions
  • New Consumer Protections Level Playing Field: Community banks will no longer have to compete with unregulated non-banks.  The Consumer Financial Protection Bureau (CFPB) will have the ability to adopt rules that prohibit unfair or deceptive practices.  It will have the power to enforce these rules on large banks, mortgage companies, private student lenders, payday lenders, companies for which the CFPB receives many consumer complaints and companies that engage in conduct that poses a risk to consumers as well as major players in the shadow banking industry.
    One Exam & Enforcement Regulator: Rules written by the new CFPB will be enforced by the same regulator that enforces safety and soundness rules for banks with assets below $10 billion – i.e., the OCC, Fed, or FDIC.  The CFPB will not be able to tell banks what products to offer or to cap interest rates.
  • Consumer Protections Are Consistent with Safety and Soundness: The CFPB must consult with the safety and soundness regulators in writing rules to ensure consistency with the safe and sound operations of banks.
  • Protections During Rule Making: The CFPB is required to consult with community banks before writing new rules, and consider the impacts they might face.  
  • Easier Mortgage Disclosure: The CFPB will create one form that combines the two federal mortgage disclosures currently required, eliminating this burden to small community banks. 
  • Flexibility in Applying New Mortgage Protections: The special needs of small banks in rural and underserved areas are recognized:
  • Seasonal Workers: Allows banks to consider seasonal and irregular income when making mortgage loans, recognizing the needs of farmers, fishermen, the employees in tourism industry, and other similar types of workers.
  • Fairness for Moderately Priced Homes: Requires regulators to adjust the points and fees cap for smaller mortgage loans when determining a qualified mortgage to protect areas with lower housing prices from being penalized unfairly.
  • Rural and Underserved Communities: Provides authority to the Federal Reserve and CFPB to write regulations that allow for balloon mortgages to be defined as qualified mortgages for banks serving rural or underserved communities and to exempt banks serving those areas from escrow requirements.  This provides more flexibility than current law.
  • Exempts small public companies from auditor attestations under Sarbanes-Oxley section 404(b)
  • Preserves the federal thrift charter
  • Preserves state lending limits for state chartered banks
  • Strengthens the deposit cap on acquisitions of depository institutions by including thrift deposits in the 10% cap
  • Exempts the Federal Home Loan Banks  from concentration limits