The Executive Committee, along with the Chair and Vice Chair of the Legislative Committee, trekked down to Washington D.C. earlier this week to meet with FDIC Director Thomas Hoenig and senior FDIC staff, as well as OCC Deputy Comptroller Paul Nash and his staff, plus Congressional staff for Senators Toomey, Casey, and Congressman Fitzpatrick.
The discussions focused on Basel III and the punitive effects it has on the community banking model. Specific examples included Basel III’s calculations which create a double dip effect on delinquent loans, excessive risk weights in a number of asset categories and the potential disruption in the availability of credit while banks attempt to rebuild or add new capital to comply with the new rules, just to mention a few.
The Committee asked the regulators if they had analyzed the effect Basel III might have had on the nearly nine hundred failed banks and suggested that even if Basel III was in place four years ago, those failed banks would have been closed anyway. The regulators indicated that the common theme among the banks that failed was commercial lending concentration. The Committee suggested if that were the case, why not adjust Basel I risk weights to provide additional capital for that risk instead of reinventing the wheel. Mr. Nash responded they were reviewing all options and Mr. Hoenig commented that he was reviewing many alternatives including risk weight adjustments. He added that he preferred a rule built around tangible capital without all of the add-ons.
Both sets of regulators acknowledged the firestorm of letters that were received from community bankers and in that regard we encourage everyone to continue writing letters each time a comment period is open, because it definitely gets their attention. The Committee also expressed serious concern over the QRM/QM proposals floated around by the CFPB and whether Congress will find an avenue to temporarily extend the TAG program.
“Our recent trip to Washington to meet with regulators and congressmen was a great way to follow-up on the letters and phone calls our members have recently submitted regarding Basel III” said PACB Chairman Ronald Geib (Harleysville Savings Bank). “Educating the decision makers on the impact of the proposed regulations on our banks, and consequently, on our communities, is a message that needed to be delivered in person.”
Although not a co-sponsor of the bipartisan Senatorial letter that was sent last month to regulators, Senator Casey has been a supporter of temporarily extending the TAG program. In discussions with his staff, it was noted that consideration would be given to writing a letter to regulators over concern of the Basel III standards on Community Banks as well as weighing in again on the TAG extension.
The meeting with Senator Toomey’s staff was equally beneficial and productive. Senator Toomey was unable to attend the meeting but welcomed questions from the industry that he would be able to ask of the regulators. The hearing, which focused on the Notice of Proposed Rules put out earlier this year, was held yesterday and featured several poignant questions from Senators on the committee specifically as it relates to the effect on the community banking industry.
Following up from a town hall from earlier in the season, the executive committee visited the office of Rep. Mike Fitzpatrick and met with his Chief of Staff to express gratitude for his continued support of community banks and provide brief remarks on the issues that are likely to come up in committee. Speaking on the benefit of the trip and meetings, Chairman Geib offered that, “One of the side benefits of making the visits, was deepening my understanding of the difference community banks make in their home towns. Congressmen, too, appreciate and enjoy hearing that community banks are actively and positively supporting the communities that are back in their district.”