February 10, 2015

Sen. Brown Opening Statement at Banking Committee’s Hearing on Regulatory Relief for Community Banks and Credit Unions

WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – Ranking Member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – released the following opening statement, as prepared for delivery, at today’s hearing entitled “Regulatory Relief for Community Banks and Credit Unions.”
Brown’s remarks, as prepared for delivery, follow.
Senator Sherrod Brown - Opening Statement: Hearing on “Regulatory Relief for Community Banks and Credit Unions” 
February 10, 2015
Thank you, Chairman Shelby.  I appreciate that you have invited back the federal and state agencies to continue the conversation from last fall about regulatory relief for small banks and credit unions. 
This hearing is timely as the federal agencies have made important changes recently that benefit the smallest depository institutions. 
To highlight a few, in January, the NCUA re-proposed its Risk-Based Capital rule to be responsive to concerns raised by small credit unions. 
A few weeks ago, the CFPB announced changes to its mortgage rules, a win for small lenders, particularly those in rural and underserved areas. 
The Fed proposed to eliminate quarterly consolidated financial reporting requirements for certain bank holding companies and savings and loan holding companies under $1 billion.
Since the last hearing, Congress has also acted. 
It passed, and the President signed into law, several regulatory relief bills that were discussed at the September hearing and supported by those who will be before this Committee on Thursday.  These bills included:
·         A bill introduced by Senators King, Warner and Tester  that doubled the threshold for the Small Bank Holding Company policy statement;
·         A bill supported by Senators King, Reed and Warner to allow insurance for credit union members’ IOLTA accounts; and
·         A bipartisan bill pushed by Senator Moran and myself to permit financial institutions to offer prize-linked savings accounts.
Also, as a result of Congressional action, led by Senator Vitter, the President has nominated a community banker to serve on the Federal Reserve Board.   
There were also regulatory relief proposals that I supported that did not cross the finish line last year. 
I am pleased that Senators Heitkamp and Moran have re-introduced this morning the Privacy Notice Modernization Act. 
Last year, this bill had 75 cosponsors.  Mr. Chairman, this bill is ready for action and we should move on it as soon as we can.  
There is no question that regulators and Congress have been responsive to the concerns of small institutions. 
We have acted where legitimate problems have been identified, and Members and stakeholders have come together to find a compromise. 
I thank the witnesses today for helping in that process.
I do not believe that every bill intended to provide regulatory relief to small institutions is a good idea though. 
Some proposals could threaten the safety and soundness of individual institutions, while others could remove important consumer protections that all customers deserve, no matter the size of their bank. 
We must not forget that 442 banks with less than $1 billion in assets failed as result of the crisis.  The cost to the Deposit Insurance Fund was in excess of $26 billion.
Lending is an inherently risky business – and we must make sure that we do not encourage unsafe practices in our efforts to tailor regulations to small lenders.
We need to establish a process to evaluate the merits of the proposals being suggested today and those we will hear about on Thursday.
We will not be successful this Congress in providing regulatory relief if our proposals do not have broad bipartisan consensus, and are attached to unrelated, must-pass legislation. 
Our prospects are even less likely if we try to pair regulatory relief with attempts to roll-back Wall Street Reform.
I am open to solving real problems affecting community institutions.
I think we can find common ground if our goal is to provide meaningful relief to the nation’s smallest institutions, while not compromising safety and soundness or consumer protection.
Today’s witnesses can help us evaluate proposals.  They have done significant research and other work to better understand the characteristics of community banks and small credit unions.  The panelists also understand why and how small institutions fail. 
This can help us target relief to the smallest institutions. 
For example, in Ohio, 80 percent of the community banks are very small, under $500 million in total assets. 
These are the types of institutions that feel the impact of burdensome regulations the most, whether it is providing another report to their regulator or needing to hire another employee for compliance. 
Last, I look forward to hearing more about the EGRPRA (egg-RIP-ra) review currently underway. 
The Fed, OCC, and FDIC are required by law to review the regulations and identify those which are duplicative, outdated, or unnecessary.  The NCUA, state regulatory agencies and CFPB participate in this process voluntarily.
This review supplements the significant analysis of impacts that the agencies also do while writing a rule. 
I appreciate that you have already held meetings in LA and Dallas, and will head to Boston, Chicago, DC, and rural areas, later in the year.  I would encourage you to consider a meeting in Ohio as well.
This review will be completed next year, and any actions we take in Congress should complement, not complicate, the process currently underway by the agencies. 
Thank you Mr. Chairman.