Champion of Community Banking

Champion of Community Banking

Fresh from joining PACB at The 139th Annual Convention, ICBA President and CEO Cam Fine sits down with PACB President and CEO Nick DiFrancesco to discuss the future of community banking, Wells Fargo, regulatory relief, credit unions, and more in this exclusive interview.

Cam Fine

PACB President/CEO Nick DiFrancesco (ND): Heading into your 14th year as President and CEO of the Independent Community Bankers of America (ICBA,) you have guided community banks through some of the most challenging years for the banking industry. What trends are taking shape in the industry and in your opinion what does the future hold for community banking?

ICBA President/CEO Camden Fine (CF): The future of community banking depends on how we as an industry and as a country respond to the challenges of excessive regulation and consolidation. We absolutely have to maintain a diverse and decentralized financial system to support our economy, consumers and small businesses. That’s why ICBA fights so hard for equitable regulation and relief for de novo banks, so community banks aren’t hamstrung by rules designed for the largest financial institutions, which has exacerbated industry consolidation.

I think we’re also seeing community banks respond to the changing environment through innovation. Whether that’s using new technologies and social media, partnering with fintech companies, or embracing new customers like the millennial generation and those turned off by the megabanks. There are plenty of opportunities out there for community banks.

ND: The Wells Fargo scandal has sent shockwaves through the financial institutions sector. It has implications far beyond the harm imposed upon its customers. Can you talk about its after-effects?

CF: One of the major concerns of community bankers is how Washington responds. We’ve seen again and again how the misdeeds of the big banks result in new regulatory burdens for the community banks that have done nothing wrong. So ICBA is working to make sure any policy response differentiates between community banks and megabanks such as Wells Fargo.

Of course, these kinds of scandals at the largest and systemically risky banks can also affect our reputation among consumers, who will sometimes lump all banks together as bad guys. So ICBA continues educating the media and the public on the difference between the large banks and community banks. ICBA has spent decades building up goodwill for the community banking sector with policymakers in Washington, so we are not going to let the misdeeds of Wells tarnish our reputations.

ND: You recently mentioned that the Wells Fargo scandal is a “defining moment for community banks.” Can you expand on that?

CF: ICBA and community bankers are using this opportunity to clearly distinguish our business from that of the largest banks in the minds of both policymakers and the American public. In my view, the Wells Fargo fraud is a result of the megabanks’ transaction-based business model, which profits by squeezing transactions from as many customers as possible. This led directly to Wells Fargo’s phony accounts, and it contrasts sharply against the relationship-based model that keeps community banks accountable to their customers. By making this difference crystal clear, we can reach new customers and at the same time advance tailored banking regulations, which will benefit community banks and the customers and communities they serve.

ND: What opportunities do you see for regulatory relief for community banks in the lame duck session and the 2017-2018 cycle moving forward?

CF: Much depends on how the election shakes out, but we have teed up a lot of our Plan for Prosperity regulatory relief proposals in Congress. The 114th Congress has already passed many of our requests last session, and we are positioned to get more if there is a robust lame duck session. The House has passed a number of ICBA-advocated regulatory relief bills. And the House Financial Services Committee’s passage of the Financial CHOICE Act puts us in a great position on many of our top regulatory relief items included in that legislation.

Notably, we had success at the end of last year with the inclusion of some of our priorities in the FAST Act and omnibus spending package, such as relief for portfolio mortgage loans and privacy notices as well as the expanded 18-month exam cycle. So we’re going to try to replicate that success this fall.

With all the legislation that we have teed up, and with the excellent reputation that community bankers enjoy on Capitol Hill, ICBA is very well-positioned for the next Congress.

Cam Fine

ND: Since their inception, credit unions have enjoyed a tax-exempt status based on their legal requirements to serve those of “modest means” with a common bond. Very recently, the National Credit Union Administration (NCUA), their regulator, has sought to expand their powers, violating statutory requirements. ICBA has filed a lawsuit against NCUA. Can you tell us a little bit about it?

CF: ICBA has said that enough is enough when it comes to the credit union power grab. Our lawsuit has to do with an unlawful rulemaking allowing tax-exempt credit unions to exceed commercial lending limits set by Congress. The NCUA rule would allow credit unions to exclude nonmember commercial loans or participations from how they calculate the cap on member business loans. This flat-out contradicts federal law, so we’re calling the NCUA on it.

This is also part of a larger and more disturbing trend, in which the NCUA has transformed itself from a federal financial regulator into a cheerleader for the credit union industry. For instance, the agency is also proposing a separate field-of-membership rule that would significantly relax limits on community-based credit unions, allowing them to serve entire states in some cases. We hope that our lawsuit will get the NCUA to reconsider this rule, but we can amend our legal complaint to include the field-of-membership rule if the agency proceeds with it.

Ultimately, the NCUA has acted as a regulatory “rubber stamp” for credit unions, and we want to put a stop to it. ICBA continues to believe that the NCUA should not provide competitive advantages to credit unions while they remain exempt from taxation and many core regulations. And community bankers can personally help out through ICBA’s Credit Union Litigation Fund. More information on that is available at

ND: We are losing community banks at a fast clip, with over 1,600 community banks folding in the past five years. Including Dodd-Frank, can you talk about some of the issues contributing to this trend?

CF: For me this begins and ends with regulation. Local banks have suffered from a ceaseless barrage of new regulations going back decades, and that has of course been exacerbated by the response to the financial crisis. Again, Washington’s response was intended for the Wall Street institutions that caused the crisis, but it has come down the hardest on community banks.

We’ve gone from about 18,000 banks 30 years ago to more than 8,000 in 2010 and roughly 6,000 today. Obviously there are many factors at work here, but regulations are having a direct impact on the kinds of products and services community banks can offer their customers, which shows how dramatically they affect consolidation. Further, regulatory burdens inhibit the formation of de novo banks, which adds to the problem.

Of course, we can actually do something about this, which is why tiered regulation is so important. We are not demanding regulatory relief for the sake of regulatory relief itself. We need it so community banks can best serve their local communities, create jobs, and support economic growth and opportunity. We want people and communities to prosper.

ND: In light of the current political climate and recent events, what are ICBA’s legislative and regulatory priorities for the coming cycle?

CF: Regulatory relief continues to be our top priority, and we’ve been making significant and meaningful progress. We want to build on our recent successes with the Financial Accounting Standards Board, the FAST Act, the new rules for de novo banks, and so on.

In Congress we’re going to continue advancing our aggressive plan for legislative changes—relief from the CFPB’s mortgage regulations, Basel III capital requirements, Durbin Amendment price controls on debit card interchange, and fair tax treatment given the challenge from our tax-exempt competition. At the regulatory agencies, we’re advocating more substantial reforms to the call report, an exemption from new rules on small-dollar lending, and accommodations in the administration’s overtime rule and forthcoming overdraft regulations.

Obviously there is a lot of political uncertainty surrounding the elections and what Washington is going to look like next year, but ICBA has always worked in a bipartisan manner, and that has served us well. Our seasoned regulatory and congressional teams have secured victories for our sector during times of Democratic or Republican control in Washington. And community banks continue to have an outstanding reputation no matter who is in charge, because of their hard work and dedication to their communities. And of course we enjoy a strong presence in states across the country because of our strong allies like PACB, so I’m confident that we’ll continue making progress.

As we say at ICBA, let’s fix what’s wrong with American financial services by strengthening what’s right with it—community banks.