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 The Year Ahead for Community Banks

Happy New Year! As an association, ICBA cannot look ahead to the challenges of the New Year without a quick glance back to the year just ended. We faced very tough legislative and regulatory battles throughout 2012, achieving many successes for the community banking industry. Chief among them was modifying and delaying the Basel III capital rules, stopping the credit union business-lending power grab, raising the Securities and Exchange Commission registration threshold and making it easier to deregister, enacting a five-year National Flood Insurance Program extension with escrow relief, and gaining significant modifications to and a delay of the effective date of new remittance rules.

We also achieved relief from ATM signage laws, new accounting rules and a more onerous Subchapter S corporation community bank tax bite. Our ICBA-funded studies on credit unions and the small-business tax burden played prominently and successfully in the policy debate. I could cite several other successes as well. And while we fell just short of extending the Transaction Account Guarantee program after a determined and fierce yearlong effort, we did get the attention of policymakers like never before. Our many legislative and regulatory successes in 2012 bode well for our future efforts on behalf of the nation’s community banks in 2013.

Less than two weeks into the New Year, it is always difficult to forecast what issues will mushroom into major threats. For example, who knew one year ago that Basel III would become a serious threat to the community banking business model? Certainly 2013 will be no exception. Serious challenges will materialize, unknown to us now, that we will confront head-on, as we always do. That said, there are issues that are known to us that ICBA will confront and vigorously deal with on your behalf. So as ICBA turns its attention to the new 113th Congress, here are some of the issues we’ll be focused on.

Moving Parts for 2013.
First, ICBA-advocated legislation that advanced in 2012 but did not make it through Congress will be on the front burner again in 2013, including:
  • Legislation that would eliminate a law requiring financial institutions to provide annual privacy notices to customers even when their policies have not changed,
  • A bill to prevent community banks and their employees from having to register as municipal advisors with and be examined by the SEC, and
  • A congressionally requested Government Accountability Office report on the market impact of too-big-to-fail financial institutions.
In addition to those important rollover issues from 2012, ICBA will also be focused on:

Blocking the Credit Union Power Grab. The tax-exempt credit union industry again worked to advance legislation that would increase the member-business-lending cap and also sought to unfairly expand their powers to raise outside capital. Due to the constant drumbeat of opposition by ICBA and community banks, however, the credit unions fell short on their legislative power grab once again. But don’t expect the credit unions’ decade-long campaign to stop anytime soon—community banks nationwide will have to remain on guard throughout the 113th Congress. To paraphrase a famous movie line, they “will be back.”

Regulatory Relief. ICBA’s decades-long regulatory-relief message continued to make headway with federal bank regulators and policymakers in 2012. Like our SEC registration threshold effort last year (to name just one of our many regulatory-relief initiatives), ICBA will again put together a robust package of community bank provisions to be introduced in the 113th Congress. When our regulatory-relief package is finalized, ICBA will ask the entire community banking industry to get behind it and help us push it through Congress.

Basel III. After months of demands calling on regulators to exempt community banks from proposed Basel III capital requirements, ICBA successfully convinced regulators to delay the proposed Jan. 1 effective date of Basel III indefinitely. At the same time, there are indications from regulatory agencies that the Basel III capital proposals will be significantly modified to accommodate community bank concerns as advocated by ICBA. Look for final rules to be released in 2013.

Mortgage Rulemaking. A series of mortgage rules due out this year got off to a good start with ICBA-advocated accommodations included in this week’s Consumer Financial Protection Bureau rule on ability-to-repay requirements. Among its key provisions, the rule provides a legal safe harbor for loans that satisfy the definition of a qualified mortgage and are not deemed to be higher-priced loans, which will help avoid unnecessary litigation. Further, the rule treats balloon-payment loans as qualified mortgages if they are originated and held in portfolio by small creditors operating predominantly in rural or underserved areas. With more CFPB mortgage rules on tap, such as escrow requirements for higher-priced mortgages, the bureau’s consideration of community banker concerns in this week’s rule is a good sign for the industry.

As the FDIC’s recent community banking study so dramatically showed, community banks continue to play a vital role for Main Street communities, our nation’s financial system and the economy as a whole. That is why ICBA is proud to be the nation’s clear and uncompromised voice advocating for the interests of community banks. And it is why we look forward to continuing our push to enhance and protect the community bank franchise in 2013 and beyond. Happy New Year and great success to all!

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