CBA Federal and State Policy Positions
Federal Issues
CBA and ICBA work with Congress and the regulatory agencies to make sure community banks’ interests are front and center when policymakers make key decisions. Here is a summary of top issues.
Promoting financial reform that protects taxpayers and prevents future economic crises by ending too-big-to-fail policies through increased regulatory oversight and a resolution process for systemically-dangerous firms. Any financial regulatory reform efforts should end too-big-to-fail and create a systemic-risk regulator that identifies, monitors and supervises all institutions that pose a potential threat to financial stability. Additionally, systemic-risk fees should be imposed on too-big-to-fail firms to protect and compensate taxpayers and the Deposit Insurance Fund from future risk exposure, while also instituting a pre-funded systemic-risk premium on all systemically dangerous holding companies. The FDIC should be granted exclusive receivership, conservatorship and bridge-bank authority to resolve an insolvent institution - including the institution's holding company and affiliates - and develop a restructuring, downsizing or dissolution plan.
Supporting fair and equitable consumer protection laws that ensure all financial firms that grant credit comply with the same laws that apply to community banks and that any enhanced regulation of consumer financial products should focus on the unregulated "shadow" financial industry. Examination and enforcement of consumer protection laws should remain with a bank's primary regulator. CBA and ICBA oppose separating consumer policy and enforcement from safety and soundness enforcement because it could give rise to conflicts of interest and be counterproductive to a balanced regulatory system. Community banks should not face added regulatory burdens. Enhanced regulation of unregulated "shadow" financial institutions should be the focus of any new consumer protection laws.
Urging a more measured approach from overzealous bank examiners so that they do not further exacerbate the current economic downturn and community banks' ability to aid recovery efforts. To prevent unnecessary bank failures, examiners must exercise some restraint in their exams, take a longer tern view of real estate held by banks as collateral and not demand aggressive write-downs and reclassification of loans based on forced sales of real estate that occur during illiquid or dysfunctional markets.
Strongly supporting the federal deposit insurance system, but urging greater parity between large and small banks by broadening the FDIC assessment base. Since large banks hold a proportionately larger share of total banking assets, they should shoulder more of their fair share of any assessments. The FDIC should broaden the assessment base under its risk-based insurance system to include all assets (minus Tier 1 capital) and not just domestic deposits. Also, large, systemically dangerous banks should pay a systemic-risk premium to account for the added risk their size and activities present to the financial system and the economy. Now that banks have prepaid assessments through 2012, CBA and ICBA oppose additional special assessments or increases in assessments during that period. Any further increases would adversely impact most community banks' earnings and capital and impair their ability to lend money and serve their communities.
Reducing the 10-percent deposit concentration cap and downsizing large banks so they are no longer too-big or too-interconnected-to-fail. Our nation's financial system has become too concentrated with four of the largest banking companies controlling more than 34% of the nation's deposits and more than 45% of the assets held by U.S. banks. To prevent a recurrence of another financial crisis, Congress should downsize those institutions that pose the most systemic risk to our economy or require them to divest sufficient assets so that they are no longer too-big or too-interconnected-to-fail.
Supporting transparency for financial statements, but opposing fair value or mark-to-market requirements that do not accurately reflect a bank's financial condition. Accounting standards and guidance should not be pro-cyclical. When accounting standards are developed, provisions should be made for smaller, less complex financial institutions and businesses when the cost of implementing the standards outweighs their benefit to financial statement users. Domestic and international standards should be converged only when the result will be better transparency.
Protecting America through the separation of banking and commerce. Our nation's longstanding policy prohibiting affiliations or combinations between banks and nonfinancial commercial firms has served our nation well and was reaffirmed by the Gramm-Leach-Bliley Act of 1999. Industrial loan companies are hybrid charters that can own or be owned by commercial firms because they operate outside the Bank Holding Company Act. Congress must close the ILC loophole to preserve the separation of banking and commerce.
Maintaining the unique nature of the Federal Home Loan Bank system. The Federal Home Loan Banks must remain a strong, stable, reliable source of funding for community banks. Once the FHLBs complete their REFCORP payments, the earnings that would otherwise go to them should be kept in the FHLB system to build retained earnings and protect the system's financial condition. Also, the FHLBs' special functions and purposes must be recognized and maintained under their new regulator. The regulator should develop concentration limits for advances for both individual FHLBs and the FHLB system to protect the system's safety and soundness.
Keeping the Farm Credit System focused on agricultural lending. CBA and ICBA adamantly oppose the Farm Credit System's agenda that seeks to allow FCS lenders to become the equivalent of commercial banks while retaining their government-sponsored-enterprise status with the system's inherent tax and funding advantages. the FCS should focus on serving bona-fide farmers and ranchers and young, beginning and small farmers and their farmer-owned cooperatives. CBA and ICBA also strenuously oppose the Farm Credit Administration's "Rural Community Investments" proposal that would allow FCS institutions to extend non-farm financing to virtually anyone in towns and cities with populations under 50,000 if such financing is labeled as "investments" instead of as loans. The FCS should be required to work with commercial banks, particularly as a funding source and through loan participations.
Urging an examination of the outdated credit union model to ensure tax parity and opposing expanded powers for credit unions. Tax-exempt credit unions, which will benefit from a stabilized economy, should pay their fair share. Exempting credit unions from federal taxation is no longer justified, especially in today's economic climate and CBA and ICBA urges Congress to review this long-overlooked and unwarranted federal tax subsidy. CBA and ICBA oppose expanded powers for credit unions, particularly the proposal to raise the cap on "member business loans," so long as credit unions remain exempt from taxation and the Community Reinvestment Act (CRA). Additionally, CBA and ICBA supports the right of a financial institution to choose the type of charter under which it operates and encourages credit unions seeking bank-like powers to convert to bank or thrift charters.
Promoting community banks as common-sense lenders. CBA and ICBA supports improved community bank access to residential mortgage programs to ensure they can serve their customers. Predatory lending practices should be stopped and existing anti-predatory lending practices should be aimed at loans that have less than prudent underwriting standards and that are sold on the secondary market. CBA and ICBA oppose cram-down legislation that would allow bankruptcy judges to re-write mortgage contracts for primary residences in Chapter 13 bankruptcy cases.
Advocating for tax reforms that benefit community banks, small businesses and consumers. CBA and ICBA supports making permanent the net operating loss (NOL) five-year carryback for all community banks including TARP recipients and supports a permanent solution to the estate tax that prevents a return to pre-2001 levels. CBA and ICBA also supports legislation that would extend or make permanent expiring lower tax rates currently applied to individual income and Subchapter S corporation income, dividends and capital gains. CBA and ICBA oppose any new fee or tax specifically and exclusively targeting the financial sector through the tax code. Punishing a single sector using the tax code is bad tax policy.