Community banks and credit unions are the pillars of local economies. Locally owned and operated financial institutions serve our families, friends, and neighbors. They understand their customers’ needs because employees live in the communities where they work. However, much of the red tape created by Dodd-Frank, the massive finance law put into place under the Obama Administration, is hindering our local financial institutions. In fact, it is estimated that under Dodd-Frank the United States is losing, on average, one community bank or credit union every day.
Dodd-Frank was enacted under the guise that the federal government needed to protect banks that were “too big to fail.” Instead, it’s left behind the smaller institutions that serve customers on Main Street – not Wall Street. Taxpayer funded bailouts to large corporations have left a web of hard to navigate regulations that are stifling community banks. Now, these smaller banks are limited in their ability to help local businesses grow and create jobs within their communities.
Fortunately, the House of Representatives is taking bipartisan action to ease the burdens facing Main Street. In March, the House passed the
Taking Account of Institutions with Low Operational Risk (TAILOR) Act, a bill that requires federal financial regulators to tailor regulations to better fit a community bank or credit union’s business model and risk profile. The current “one-size-fits-all” policy imposes regulations on banks and credit unions regardless of size. This approach does not work for small community and independent banks and credit unions that end up bearing the unsustainable cost of compliance despite having less resources available than larger institutions.
Not only do community banks face unfair regulatory burdens relative to their size, they also face rigorous examinations from four different financial regulators to determine risk liability, adherence to regulations, and financial stability. If an unfavorable decision is made during an examination, the current system allows banks to appeal, but the process is secretive, and the same regulators often review their own decisions. As a result, the appeals process is often lengthy and lacks accountability, and can sometimes limit the amount of capital available for lending to local small businesses. To ensure transparency and fairness in the appeals process, the House passed the bipartisan
Financial Institutions Examination Fairness and Reform Act, which creates a new Independent Examination Review Director within the Federal Financial Institutions Examination Council. If signed into law, this will help to ensure equity within the appeals process.
Virginia is home to 70 community banks, and 15 of those banks are headquartered right here in the Sixth District. I am committed to reducing the unnecessary and burdensome regulations that Dodd-Frank has placed on our community’s local banks and credit unions. It is these institutions that offer credit and capital to small businesses that create jobs in our community and help our main streets thrive.
