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ICBA Community Banker Testifies on Regulatory Burden: Urges Consideration of Critical Legislation and Extension of TAG

Washington, D.C. (May 9, 2012)—Samuel Vallandingham, senior vice president and chief information officer of First State Bank, a community bank in Barboursville, W.Va., testified before the House Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit today on behalf of the Independent Community Bankers of America (ICBA).   During his testimony, Vallandingham urged the committee to consider the Communities First Act (H.R. 1697), which would provide much-needed regulatory relief for community banks. He also  called for an extension of the FDIC’s Transaction Account Guarantee (TAG) program.

“A surge of new financial regulation has changed the nature of my job and the community banking industry in recent years.  I am currently spending as much as 80 percent of my working time on compliance-related issues compared to approximately 20 percent as little as three years ago,” Vallandingham said in his testimony.  “Every dollar spent on compliance is a dollar less that we have to lend and invest in the communities we serve.  Every hour I spend on compliance is an hour I could be spending with customers and potential customers, acquiring new deposits and making new loans.”

Vallandingham went on to highlight the most troubling provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, including new mortgage-lending requirements that run the very serious risk of accelerating industry consolidation, which would result in higher costs and fewer choices for consumers, particularly in small communities. In speaking about the Consumer Financial Protection Bureau (CFPB), Vallandingham said that the agency must not contribute to community banks’ already daunting regulatory burden.  “The CFPB should use its authority to grant broad relief to community banks where appropriate,” Vallandingham said.

Vallandingham outlined the following measures that would help provide community banks with appropriate regulatory relief so they can continue to serve their customers and communities:

  • The Financial Institutions Examination Fairness and Reform Act (H.R. 3461), sponsored by House Financial Services subcommittee Chairman Shelley Moore Capito (R-W.Va.) and Ranking Member Carolyn Maloney (D-N.Y.).  This bill would go a long way toward improving the oppressive examination environment, a high-priority concern of community bankers and a barrier to economic recovery, by creating a workable appeals process and consistent, common-sense standards for classifying loans.
  • The Communities First Act (H.R. 1697), sponsored by Rep. Blaine Luetkemeyer (R-Mo.), which would provide carefully crafted regulatory and tax relief that would allow community banks to do what they do best—lend locally in their communities and help boost the economy.

The West Virginia community banker also urged the committee to consider a topic of equivalent interest to community banks—the need for temporary extension of the FDIC’s Transaction Account Guarantee (TAG) program. TAG deposits are needed to support community bank small business customers and small business lending in local communities. “Extending TAG would serve the same goals that I have stressed in this testimony: preserving community bank viability, supporting small business credit and deterring further industry consolidation,” Vallandingham said. “If TAG is allowed to expire at year-end 2012—in a still fragile and uncertain economic recovery— large commercial and municipal transaction account deposits will be abruptly withdrawn from community banks in favor of the too-big-to-fail banks. I urge this committee to keep these deposits in the community, where they are reinvested for the benefit of the community, and to protect small business and municipal deposits by providing a five-year extension of TAG.”