WASHINGTON (10/21/14)--Small financial institutions are disappearing from America's financial landscape due to "an ever-increasing regulatory burden," says Sen. Mike Crapo (R-Idaho). In a letter published in American Banker, Crapo, the ranking member of the Senate Banking Committee, lamented that small financial institutions are not failing, but voluntarily closing due to increased compliance costs.
"We have lost more than 3,000 small banks and more than one-half of credit unions since 1990," he wrote.
In a September Senate Banking Committee hearing, legislators expressed concern with the effects of over-regulation. Dennis Pierce, chair of the Credit Union National Association board, testified on behalf of CUNA, saying credit unions were under "regulatory assault."
"Congress and regulators ask a lot of small, not-for-profit, financial institutions when they tell them to comply with the same rules as JPMorgan, Bank of America and Citibank, because the cost of compliance is proportionately higher for smaller-sized credit unions than these behemoth institutions," Pierce said.
In his letter, Crapo called for "a frank discussion about what regulatory burdens mean for financial institutions and the communities they serve."
CUNA has expressed support for numerous regulatory relief bills in both houses of Congress in the past few months. These bills would do everything from simplifying privacy notifications to removing a limit on automated transfers from savings accounts.
From a regulatory perspective, CUNA has written to the National Credit Union Administration, the Consumer Financial Protection Bureau and the Federal Housing Finance Agency to urge proposed rules take into account the burdens that might be placed on small financial institutions.
"In light of the imperative need to reduce credit unions' regulatory obligations, we urge NCUA to add new or expand existing rules only if required to do so by law, or doing so is clearly warranted based on a compelling safety and soundness reason that can be satisfactorily addressed in no other manner," wrote CUNA Senior Vice President and Deputy General Counsel Mary Dunn in a letter to the NCUA in August.
Compliance burdens and costs are a growing concern for financial institutions. Last week one survey indicated that compliance costs were up 30% in the past year, and since January 2013, more U.S. financial institutions are reporting compliance concerns (News Now Oct. 16).
These concerns include transferring staff from revenue-generating roles to managing increased risk and compliance requirements.
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