WASHINGTON – Sixty-two mid-size and regional banks – the members of the Mid-Size Bank Coalition of America and the Regional Bank Coalition – joined today to express their support for Senate Banking Committee Chairman Richard Shelby’s proposal to regulate banks with assets greater than $50 billion based on their systemic risk profiles, and not on arbitrary size thresholds.

The banks, headquartered in communities across America, described how their operations differ from the large, systemically risky firms that Dodd-Frank sought to address.

“As evidenced by the recent Office of Financial Research report, none of our institutions could be judged, by any conceivable measure, as systemically important,” the banks wrote in the letter. “Yet, on top of an already robust regulatory and supervisory framework that regulators will retain despite any legislation, each of us has been subjected to unnecessary requirements under Dodd-Frank.

“The imposition of these demands on our banks does not benefit the public in any appreciable way. To the contrary, these requirements sap resources that we could instead deploy to extend credit and dynamically serve our local communities. Rather than hiring loan officers and other customer-service providers, we have been compelled to reallocate our budgets and engage quantitative modelers and banking consultants to prove what is already well known – that none of us pose a threat to the financial system.”

The institutions noted that money they are currently forced to spend on unnecessary compliance measures could otherwise be used to improve the economy through loans to families and small businesses.

“Under the current regulatory regime imposed by Section 165 of Dodd-Frank, we face higher operational costs and are forced to divert capital away from the products we offer and lending that helps businesses expand and create jobs,” they wrote. “Common sense reform to the application of enhanced prudential standards can benefit regulators, Main Street banks and our customers as well as support economic growth.”

“Mid-Size and regional banks need relief from regulatory requirements that are simply the result of being on the wrong side of an arbitrary line. Banks cannot successfully meet more of the credit needs of consumers and businesses and entrepreneurially serve local communities if they are forced to sideline working capital,” said Brent Tjarks, Executive Director of the Mid-Size Bank Coalition, “The $50 billion threshold for special prudential measures has had multiple unfortunate consequences. As a bank approaches the $50 billion threshold, it creates a distortion in planning for natural growth and the associated growth in lending.”

“These sixty-two institutions that serve Main Street have joined together to make one thing clear: their business models look nothing like those on Wall Street, and they shouldn’t be regulated like Wall Street either,” said William Moore, Executive Director of the Regional Bank Coalition.

The full text of the letter is below and is also available here.

About the Mid-Size Bank Coalition: The MBCA is a non-partisan financial and economic policy organization comprised of the CEOs of mid-size banks doing business in the United States. Founded in 2010, the MBCA was formed for the purpose of better representing mid-size banks within the overall banking industry, and to educate lawmakers about the financial regulatory issues and policies affecting their ability to compete fairly and to more fully support and contribute to the growth of the U.S. 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. For more information, visit www.regionalbanks.org or follow on Twitter @rgnlbanks.

Full letter text:

May 18, 2015

Chairman Shelby, Ranking Member Brown and Members of the Banking Committee:

On behalf of the undersigned mid-size and regional banking institutions, we are writing to express our support for the recently proposed Financial Regulatory Improvement Act of 2015. In particular, we applaud Chairman Shelby’s efforts to strengthen systemic risk regulation by refining the $50 billion threshold and the application of enhanced prudential standards under Section 165 of Dodd-Frank.  Title II of the bill takes the right approach to refining and targeting the Dodd-Frank Act’s focus on institutions that actually present systemic risk.  We look forward to working with the Committee on this proposal as it moves forward.

We would like to take this opportunity to explain our traditional banking model and how the current $50 billion threshold for systemically important banks has a detrimental impact on banks like us. Main Street banks, like the signatories to this letter, are based in communities across the United States, such as Buffalo, Columbus, Evansville, Knoxville, Richmond and Portland. Our banks employ more than 480,000 people, in 25,000 branches and offices and lend approximately $2 trillion to the local communities we serve.

Our bankers – and indeed our most senior executives – have daily interaction with our customers. We take in local deposits and provide traditional banking products, such as loans and mortgages to consumers and small and mid-size businesses, within specific states or regions that collectively span all 50 states. We have made the necessary risk and compliance investments that support our strategies. Indeed, this is evidenced by the following aspects of our business model:

  • Reliance on stable deposit funding
  • Revenues are driven by traditional banking activities that are well understood by the bank management and regulators
  • Limited or no trading operations or market-making activity

In sum, given our prudent business model, the undersigned banks contribute to economic growth and support financial stability. As evidenced by the recent Office of Financial Research report, none of our institutions could be judged, by any conceivable measure, as systemically important.  Yet, on top of an already robust regulatory and supervisory framework that regulators will retain despite any legislation, each of us has been subjected to unnecessary requirements under Dodd-Frank.

The imposition of these demands on our banks does not benefit the public in any appreciable way.  To the contrary, these requirements sap resources that we could instead deploy to extend credit and dynamically serve our local communities.  Rather than hiring loan officers and other customer-service providers, we have been compelled to reallocate our budgets and engage quantitative modelers and banking consultants to prove what is already well known – that none of us pose a threat to the financial system.

As Main Street banks, we desire a regulatory regime that encourages safety and soundness and protects consumers. We also seek to foster the much needed banking services that communities need to create jobs. Under the current regulatory regime imposed by Section 165 of Dodd-Frank, we face higher operational costs and are forced to divert capital away from the products we offer and lending that helps businesses expand and create jobs.

Common sense reform to the application of enhanced prudential standards can benefit regulators, Main Street banks and our customers as well as support economic growth. To this end, we encourage the Committee to work together and move forward with improvements to systemic risk regulation. Thank you.

Sincerely,

American Express, New York, NY
Arvest Bank, Fayetteville, AR
Associated Bank, Green Bay, WI
Astoria Bank, Lake Success, NY
BancorpSouth, Tupelo, MS
Bank of Hawaii, Honolulu, HI
Bank of the West, San Francisco, CA
BankUnited, Miami Lakes, FL
BB&T, Winston-Salem, NC
BBVA Compass, Birmingham, AL
BOK Financial, Tulsa, OK
Capital One, McLean, VA
Central Bancompany, Jefferson City, MO
Citizens Bank, Providence, RI
City National Bank, Los Angeles, CA
Commerce Bank, Kansas City, MO
Discover Financial Services, Riverwoods, IL
East West Bank, Pasadena, CA
Eastern Bank, Boston, MA
EverBank, Jacksonville, FL
Fifth Third Bank, Cincinnati, OH
First Citizens Bank, Raleigh, NC
First Hawaiian Bank, Honolulu, HI
First Horizon Bank, Memphis, TN
First Midwest Bank, Itasca, IL
First National Bank, Hermitage, PA
First National of Nebraska, Omaha, NE
First Niagara, Buffalo, NY
FirstBank, Lakewood, CO
FirstMerit Bank, Akron, OH
Flagstar Bank, Troy, MI
Frost Bank, San Antonio, TX
Fulton Financial, Lancaster, PA
Hancock Bank, Gulfport, MS
Huntington Bancshares Inc., Columbus, OH
IBERIABANK, Lafayette, LA
International Bancshares, Laredo, TX
M&T Bank, Buffalo, NY
MB Financial, Chicago, IL
Old National Bank, Evansville, IN
OneWest Bank, Pasadena, CA
Pacific Western Bank, Los Angeles, CA
People’s United Bank, Bridgeport, CT
Popular Community Bank, New York, NY
PNC Bank, Pittsburgh, PA
The PrivateBank, Chicago, IL
Raymond James Bank, St. Petersburg, FL
Regions Bank, Birmingham, AL
Scottrade Bank, Saint Louis, MO
Signature Bank, New York, NY
Silicon Valley Bank, Santa Clara, CA
SunTrust Banks Inc., Atlanta, GA
Susquehanna Bank, Lititz, PA
Synovus Bank, Columbus, GA
TCF Bank, Wayzata, MN
Texas Capital Bank, Dallas, TX
Trustmark, Jackson, MS
UMB Financial, Kansas City, MO
Umpqua Bank, Portland, OR
United Bank, Charleston, WV
Valley National Bank, Wayne, NJ
Webster Bank, Waterbury, CT
Wintrust Financial, Rosemont, IL
Zions Bancorporation, Salt Lake City, Utah