The Federal Deposit Insurance Corp. has historically defined community banks as those with less than $1 billion in assets, but regulators have recently added financial thresholds to the definition. What do you see as the difference between a community bank, like Citizens Bank of Rogersville, and a larger bank? Community banks are part of a community. Our employees live around the area and a lot of community banks are family banks like ours. Community banks put money back into the community to help grow the community, while larger financial institutions use local deposits to fund loans in other states. It’s a benefit to not only the customers, but also the community itself.
Citizens Bank of Rogersville looks for small-business lending wherever we can, a staple of community banking, and we are very involved with the school district, local organizations and other local activities. Community bankers are willing to consider character and family history when making loan decisions because they know the customers, whereas the larger banks are more often focused on large corporations.
You were recently re-elected to serve as treasurer of the Independent Community Bankers of America national trade association. As a member of the board, what are your goals? The ICBA strives to protect the franchise of community banking. The current regulatory arena out there is very hard. Community banks are a little bit hampered because we don’t have the ability to hire a lot people for a certain job. Our people wear a lot of different hats and are responsible for many functions at the bank. The more regulations we get, the harder and harder it is to stay in compliance. Advocacy for community banks is one of ICBA’s main missions.
The ICBA has said too-big-to-fail financial institutions pose risks to the financial system because they receive a taxpayer-funded advantage over smaller institutions and receive favorable treatment from regulators. How should this problem be addressed, and what does it mean for community banks? We would like to be treated equally. If community banks were to have done some of the things that have been done by the too-big-to-fail banks, they would get penalized and prosecuted. It seems like the big banks are immune to this. TBTF banks have a definite advantage in that they are deemed to be backed by the U.S. government. Community banks do not have this. We would like to see the TBTF banks treated the same as community banks when issues arise – an equitable regulatory and judicial system.
Recently, there have been several news stories relating to U.S. Attorney General Eric Holder’s remarks saying the size of TBTF financial institutions inhibits the U.S. Justice Department from prosecuting because of the possibility of jeopardizing the U.S. economy.
What sorts of things have larger banking intuitions gotten away with in your opinion? Larger banks have different subsidiaries that don’t relate to banking, and they end up doing some things that can harm the bank or holding company. The TBTF banks have used federally insured deposits in the derivative markets through subsidiaries and have lost billions. We stick to just the banking module and serve our communities in a safe and equitable manner. We would like a level playing field.
A priority of the ICBA this legislative session is mortgage-lending reform. How do the new Consumer Financial Protection Bureau mortgage-lending rules affect community banks? We are not really under the direct control of the CFPB, because there is an exemption for banks under $10 billion. But we will be subject to a lot of the rules through our own regulators. It’s going to be really difficult for people to apply for loans and be approved with all the new restrictions coming down. If you’ve ever seen a loan agreement, it’s about an inch thick already, and these regulations are just more (paperwork) to fill out and comply with. It’s going to get to the point where it’s just too much for small banks to try and keep up with this. A lot of these types of loans are loans we have been doing for years with no problem, because we work with our customers. They are not just another number to us. If we know something is going on with the family, we can work with them and get through the hard times if we need to. We don’t want to put the burden on our customers. It’s not us requiring these new rules be followed, but we have to do it.[[In-content Ad]]
