The United States has the world’s most diverse financial system with thousands of different institutions serving millions of different types of customers in large cities and small communities across the country. This diversity benefits our banking customers and supports economic growth.
Unfortunately, federal regulations fail to reflect our financial system’s diversity and place all banks into two categories: community and mid-sized banks, and large, “too big to fail” banks. As a result of this regulatory architecture, medium-sized, regional banks are subjected to costly, unnecessary and burdensome regulations, which hinder the banks’ ability to provide crucial services and loans to consumers and small businesses.
Drawing on my experience as a former state bank examiner and community banker, I have introduced bipartisan legislation in the House that would ease burdens on regional banks by tailoring and improving the prudential standard regulations in place to appropriately distinguish between traditional regional banks and more complex and interconnected bank holding companies, which have the potential to present systemic risk to the financial structure.
The bill would keep the current $50 billion asset for small community banks with five flexible and targeted activity-based standards. Financial regulators will use these standards to designate banks for enhanced supervision and prudential standards.
Regional banks operate in all 50 states, holding 25 percent of U.S. banking deposits and serving local communities in more than 22,000 branches and offices. These banks focus on taking deposits and making loans, and they are integral to financial lives of consumers and millions of small and medium-sized businesses. Regional banks inherently pose little systemic risk due to their focus on traditional consumer banking activities. Nonetheless, because many regional banks have more than $50 billion in assets, they are lumped into the same regulatory regime as more complex and interconnected banks that have substantial international activity.
To continue to place regional banks in the same category as our nation’s biggest banks is short-sighted and counter-productive. My bill would improve and strengthen financial oversight by giving regulators the ability to distinguish between banks based on their business activities—and their riskiness—not on mere size alone. This would allow regulators to craft tailored and appropriate rules for banks of all types.
Not only would this bill strengthen our financial system, but it would also benefit many consumers and business owners. By easing these unnecessary regulations, banks can refocus their attention and resources from compliance burdens to providing excellent service to new and existing consumers and small businesses, encouraging economic growth throughout all American communities.
Luetkemeyer has represented eastern Missouri congressional districts since 2009. He sits on the Financial Services and the Small Business committees.