Regional Bank Coalition Launches to Support Risk-Based Financial Regulation
Contact: Bill Mashek | 202-215-9009
WASHINGTON – A group of regional banks today launched the Regional Bank Coalition a new organization that supports regulation based on risk and business model to assure bank safety and soundness.
“As banks that help local communities across the country thrive and prosper, regional banks welcome appropriate government regulation, based on risk and business model, to assure our safety and soundness,” said William Moore, the coalition’s executive director. “But regulation should be tailored to risk, not based on arbitrary thresholds that don’t differentiate between business models.”
Regional banks play a unique role in America’s financial system in that they are strong enough to serve large commercial customers, yet their balance sheets more closely resemble smaller community banks. Core deposits make up 72 percent of their total assets, while trading assets and broker-dealer assets are less than one percent. They collectively have less than one percent of the banking industry’s total credit default swap exposure. Taken together, the assets of the top twenty regional banks equal the size of about one of the money center banks.
“Regional banks didn’t cause the systemic financial crisis of 2008, and they don’t carry the kind of risk associated with large Wall Street banks,” Moore said. “They don’t look like the big money center banks, they don’t act like them, and they shouldn’t be regulated like them.”
When the Dodd-Frank Act was enacted, it imposed significant systemic risk regulations on regional banks based on an arbitrary asset number of $50 billion, rather than taking into account a bank’s risk profile or business model. Since then, regulators at the Financial Stability Board and the Basel Committee for Bank Supervision have developed a more precise test to measure systemic risk by examining five factors: size, interconnectedness, complexity, global activity, and dominance in certain customer services, also known as substitutability.
Using that test, recent studies, including one by the Treasury Department’s Office of Financial Research, have shown that regional banks do not exhibit the systemic risk factors attributed to the larger, more complex international banks.
“From every risk perspective, regional banks are safe and sound,” Moore said. “The Regional Bank Coalition will support policies to regulate them appropriately so they can deploy their assets to build the American economy.”
About the Regional Bank Coalition: The Regional Bank Coalition is a group of regional banks that support regulation based on risk and business model to ensure safety and soundness. Members include SunTrust, Regions, Huntington, Fifth Third, Capital One, BMO Financial Group, BBVA Compass, BB&T, Bank of the West, and American Express. For more information, visit www.regionalbanks.org or follow on Twitter @rgnlbanks.