ICBA - News - News Release - ICBA Tells Congress: Focus CFPA on Unregulated and Too-Big-To-Fail; Pass Legislation to Hold Systemic-Risk Firms Accountable
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ICBA Tells Congress: Focus CFPA on Unregulated and Too-Big-To-Fail; Pass Legislation to Hold Systemic-Risk Firms Accountable

Washington, D.C. (September 30, 2009)—The Independent Community Bankers of America (ICBA) today, in addressing the proposed Consumer Financial Protection Agency (CFPA), urged Congress to focus on the unregulated and too-big-to-fail firms, and to pass legislation to hold systemic-risk firms accountable.

“Consumer protection is the cornerstone of our financial system and because community banks, like mine, place such high importance on it, we stand out in a very crowded field of competitors,” said R. Michael Menzies, ICBA chairman and president and CEO of Easton Bank and Trust Co., Easton, Md., in his testimony before the House Financial Services Committee. “Community bankers across the country strongly believe a new regulator and additional regulatory burden for them is not the answer to protecting consumers, when the true source of the problem lies outside community banks.”

Menzies pointed out that over-leveraged, too-big-to-fail firms have cost American taxpayers over $7 trillion, while non-bank financial institutions have been allowed to operate largely unencumbered by government regulation or accountability. “Congress needs to pass legislation that subjects mammoth too-big-to-fail firms to stronger supervision, capital and liquidity requirements, and to better protect taxpayers by establishing a systemic-risk fund paid for by those firms. An important part of the solution to the too-big-to-fail problem is contained in the Bank Accountability and Risk Assessment Act of 2009, introduced by Rep. Luis Gutierrez (D-Ill.). ICBA urges the Committee to incorporate this measure into any broader financial regulatory reform proposal it considers in the future,” Menzies said.

While community bankers agree that consumer protection is paramount, Menzies stressed that ICBA continues to have concerns with the agency as currently proposed. Menzies said that ICBA greatly appreciates that Chairman Frank’s draft legislation takes important steps to address community bank concerns, specifically by eliminating the plain vanilla product requirement and the vague ‘reasonableness’ standard. ICBA remains concerned that the legislation splits the safety and soundness and consumer protection functions between two agencies and establishes the CFPA as the ultimate arbiter of disputes between itself and a prudential regulator. Menzies said bank regulators have the necessary expertise to balance safe and sound operation practices with consumer protection.

In discussing the powers of the CFPA’s advisory board, Menzies said that the current draft would create an autonomous director and an advisory board with no real authority. The consequence would be a regulator with only vague limits and checks on its powers, and no voice for community bank viewpoints in the agency’s decision-making process.

ICBA thanks House Financial Services Committee Chairman Barney Frank (D-Mass.) for holding this timely hearing and looks forward to working with Congress on regulatory reform that better protects American consumers, and allows our nation’s Main Street community banks to continue to serve their customers and make their communities a better place to work and live.