A New Regulatory Structure For Community Banks


  • ICBA supports the dual banking system where bank chartering and supervision is divided between the federal government and the states.
  • ICBA supports a multi-agency federal bank regulatory system.
  • ICBA strongly supports the independence of each federal bank supervisor but encourages enhanced and improved cooperation and consultation among the agencies.
  • ICBA supports the statutory requirement that at least one member of the Board of Governors of the Federal Reserve System have experience as a community banker or community bank regulator.
  • A new office in the Treasury Department – Assistant Treasury Secretary for Community Financial Institutions – should be created to coordinate federal policy for our nation’s community banks.


The dual banking system has served our nation well for 150 years. The structure of our bank regulatory system defines the future of our banking system and is critical to the nature of our economy. Multiple federal banking agencies and the dual banking system, with its state and federal charters, provide checks and balances, which promote both a regulatory system that is sensitive to financial institutions of various complexity and size, and a diverse and competitive financial system that better serves consumers and small businesses.

Regulatory Choice

Given the enormous power of bank regulators, and the critical role that banks play in the health and vitality of the national economy, it is imperative that the bank regulatory system maintains real choice. Community banks must be able to choose their primary federal regulator. Having multiple agencies contribute to key issues provides valuable regulatory checks and balances.

Agency Cooperation and Coordination

While regulatory choice is important, interagency cooperation and coordination of efforts is equally necessary. In many cases, Congress has directed the agencies to adopt concurrent rules and policies and the Federal Financial Institutions Examination Council (FFIEC) helps foster cooperation and coordination. The adoption of concurrent rules by several agencies may take more time and effort, but the result is often a superior product with greater acceptability and legitimacy— especially for complex or controversial issues—when the expertise and experience of each agency is brought to bear.


Safety and soundness regulators should be objective, nonpartisan and protected from political influence. Independence helps prevent the politicization of bank supervision and regulation and avoids politically motivated direction of policies. Independence is essential for the smooth functioning and safe and sound operation of the banking system, and in turn, the health of the national economy.

Community Bank Representation in Policymaking

Community banks serve a critical role in the nation’s economy, particularly with respect to small businesses and rural communities, and have a unique understanding of how to promote healthy and vibrant local economies. Because community bankers can bring this valuable expertise and perspective to the table, representation of community banking at the regulatory agencies and at the Treasury Department is in the interest of the agencies, the economy and the American people. ICBA supports the statutory requirement that at least one member of the Board of Governors of the Federal Reserve System have experience as a community banker or community bank regulator. Likewise, an office within the Treasury Department for an Assistant Secretary for Community Financial Institutions would ensure that community banks are given appropriate and balanced consideration in the Treasury Department’s policy making process.

Staff Contact: Chris Cole

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