Karen Thomas: Prolific policymaking

Michelle “Miki” Bowman will bring a community bank perspective to the Federal Reserve Board’s policymaking activities.

Community banks had a banner year in 2018.

By Karen Thomas, ICBA

With community bankers already looking ahead to the rapidly approaching new year, they can look back on 2018 as a momentous period of advocacy gains. In fact, a considerable portion of next year’s agenda will involve implementing the significant policy successes enacted this year.

If 2017 was a turning point for community banks, with many longtime priorities finally on track for passage in Washington, then 2018 was the consummation of those efforts. This was a year of not only congressional regulatory relief but also of a more common-sense approach to community banks by the banking agencies. We saw the long-overdue confirmation of a member to the Federal Reserve Board’s community banking seat, enhanced Small Business Administration programs and more.

And all of it was the culmination of relentless, years-long advocacy by ICBA and the nation’s community banks. Here’s a look at some of what we accomplished this year.

Right-sized regulations

The most high-profile community banking victory of 2018 was the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155). Signed by President Donald Trump in May, this historic law is the result of a multi-year ICBA effort to further tier regulations to the size, risk, complexity and business model of community banks.

S.2155 includes numerous policies from ICBA’s Plan for Prosperity, including provisions offering “qualified mortgage” relief, simplifying capital requirements, implementing Volcker Rule and escrow exemptions, expanding access to the 18-month exam cycle and authorizing a short-form call report. It also provides relief for larger community banks, such as eased stress testing and risk committee requirements. These gains came on top of the significant tax relief contained in the Tax Cuts and Jobs Act finalized at the end of 2017.

While ICBA continues to encourage regulators to quickly implement the outstanding provisions of S.2155, the agencies have issued guidance or regulations on many policies. Relief from the Home Mortgage Disclosure Act and TILA-RESPA Integrated Disclosure rule, reciprocal deposit reform and more have already advanced. A comprehensive tracker on the implementation of S.2155 and an interactive timeline on its passage are available at icba.org/s2155

Sustainable environment

The steady implementation of S.2155 is due in no small part to the improved regulatory environment. New regulators, such as Joseph Otting at the Office of the Comptroller of the Currency (OCC), Jelena McWilliams at FDIC and Mick Mulvaney at the Consumer Financial Protection Bureau (CFPB), have worked to instill a culture of transparency and accountability at their agencies.

Michelle “Miki” Bowman will prove a valuable presence on the Federal Reserve Board as she fills the ICBA-advocated position dedicated to individuals with experience in community banking. Bowman is uniquely qualified for the role, with service as a Kansas state bank commissioner, community banker, family farmer, and congressional and agency staffer.

The improved environment has already led to tangible pro-community bank reforms. Regulators this year eased commercial real estate appraisal mandates, proposed phasing in the day-one impact of the Current Expected Credit Loss (CECL) accounting standard, reduced disclosure requirements for publicly held community bank holding companies and granted exceptive relief from beneficial owner requirements.

Legislative loose ends

Meanwhile, Congress has not limited its pro-community bank agenda to S.2155. Following testimony from Cynthia Blankenship, vice chairman and COO of Bank of the West, in January, Congress passed legislation over the summer strengthening the Small Business Administration’s 7(a) program. The bipartisan Small Business 7(a) Lending Oversight Reform Act stabilizes 7(a) program funding by allowing the agency to lift the overall cap on general business lending by up to 15 percent if the cap will be reached, as it was in 2015.

Congress also passed a resolution overturning the CFPB’s 2013 guidance on indirect auto lending, which held certain lenders that offer auto loans through dealerships responsible for unlawful pricing.

Unfinished business

While 2018 was a banner year for community banks, much advocacy work remains. For one, ICBA and several members of Congress are calling on the Treasury Department to revisit its proposed rule implementing the 20 percent tax deduction for Subchapter S banks, which unreasonably limits the deduction established by the Tax Cuts and Jobs Act.

Among many other priorities, ICBA is working to:

  • support final passage of a five-year farm bill
  • oppose the credit union industry’s expansionist agenda and its plans to ease megabank capital rules
  • build on Nelnet’s withdrawn industrial loan corporation application to push for regulatory consistency at technology companies
  • advocate a Federal Reserve role in faster payments
  • promote pro-community bank housing finance reform.

Meanwhile, initiatives to reform the Bank Secrecy Act and Community Reinvestment Act, pass a legal safe harbor for banking cannabis businesses and transition from LIBOR to alternative reference rates require continued involvement.

With 2019 arriving around the corner, community bankers can celebrate the holidays knowing that we gave it our all this year and are reaping the benefits.

With 2019 around the corner, community bankers can celebrate the holidays knowing that we gave it our all this year and are reaping the benefits. While much remains to be done, we can be confident in our continued success following a prolific and historic 2018.


Karen Thomas (karen.thomas@icba.org) is ICBA senior executive vice president of government relations and public policy

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