FOR IMMEDIATE RELEASE
ICBA Voices Support for Legislation That Holds Systemic-Risk Institutions Accountable
Washington, D.C. (October 28, 2009)—The Independent Community Bankers of America (ICBA) today voiced support for draft legislation released by the House Financial Services Committee and the Obama administration to rein in the systemic-risk institutions that were the root cause of the nation’s financial crisis.
“As our country continues to weather economic hardship, ICBA and our nation’s more than 8,000 community banks commend the Obama administration and the House Financial Services Committee for taking the initiative to rein in the too-big-to-fail institutions that rocked the very core of our nation’s economic system,” said Camden R. Fine, ICBA president and CEO. “The measures outlined in the draft legislation will help ensure that systemic-risk institutions never again can become so large and interconnected that they have the ability to topple the economic well being of communities in cities and towns throughout America.”
The draft legislation includes several ICBA policy proposals, including:
- Stricter regulatory standards and the creation of a Financial Services Oversight Council that will monitor and reduce the threats that systemically risky firms pose to the financial system;
- A process that gives the FDIC resolution authority for winding down the largest non-bank financial institutions;
- Authority for the Federal Reserve to require systemically risky holding companies to sell assets or terminate activities if they pose a threat to the company’s safety and soundness or the nation’s financial stability.
- Safeguards on current ILC and other non-bank bank institutions and closes the ILC loophole;
- Preservation of the federal thrift charter.
While ICBA generally supports the draft legislation, the association strongly recommends the creation of a pre-funded systemic-risk fund. A pre-funded resolution process has a number of advantages because it avoids an initial call on taxpayer funds that would be likely if an institution were to fail unexpectedly, and it avoids the pro-cyclical effects of a post-resolution assessment. ICBA also continues to call on Congress to support the Bank Accountability and Risk Assessment Act of 2009, (H.R. 2897), which would broaden the assessment base for FDIC deposit insurance premiums and create a separate risk-based assessment for too-big-to-fail banks.
Additionally, ICBA continues to urge policymakers to restructure and downsize too-big-to-fail institutions to the point where they no longer pose a systemic risk and their failure would no longer threaten our national economic well-being.
ICBA looks forward to working with the Obama administration and Congress as this legislation moves forward. Thoughtful systemic-risk reforms put into place today will ultimately strengthen our country’s financial system for future generations.