By: Michelle Patana
The Federal Deposit Insurance Corp. released a new study regarding community banking in the United States and highlighting the ways in supervision and other regulatory provisions have impacted the industry. Community banks expressed positive sentiment about the research, and its efforts to build stronger bridges and communication between federal agencies and local institutions.
The study also noted the strides agencies have made since the mid-80s to provide more flexibility for community banks, many of which have been heavily burdened by new layers of legislation. The research does not recommend changes or updates to existing laws and regulations, but it does serve as a starting point for dialogue among local banking executives and lawmakers about the struggles that institutions are facing today.
"Of course we would all like to have all issues resolved more quickly than they ever can be," Dorothy Savarese, president and CEO of Cape Cod Five Cents Savings Bank, told American Banker. "But what [FDIC Chairman Martin Gruenberg] and his staff … did do was really lit into a lot of the most frequent complaints by institutions - the things that people were saying were really throbbing - in terms of mitigating some of those concerns."
Will the study yield positive results?
While the response to the data was overwhelmingly positive, some bankers have noted that the study is a far cry from setting boundaries between rules that apply to large banks and those imposed on community institutions. Currently, many industry analysts, bank consultants, lawmakers and policy experts have voiced their concerns that certain mortgage underwriting rules and Dodd-Frank provisions will only hamper community banks' progress, rather than bolstering the overall economy.
This scenario may become more apparent in the near future as community banks gain a bigger market share and see a spike in membership from consumers who are fed up with impersonal "big banking" policies. By the time this catches up with lawmakers, however, many community banks may have already started to buckle under the strain of these new rules. Many have noted that while regulation of the financial industry is a positive step forward, they have decried the assignment of policies designed for Wall Street behemoths on Main Street Banks.
While the Federal Reserve has noted that it will seek to differentiate between these institutions during its rule-making phase, there has yet to be any finalization to new rules that would lessen the strain on small banks.