Frequently Asked Questions

 

What is the Regional Bank Coalition?

The Regional Bank Coalition (RBC) is comprised of 18 regional banks from around the country, all united in pushing for the adoption of properly calibrated regulations based on several risk factors, instead of just asset size.

 

What are regional banks?

Regional banks operate a traditional banking business model: taking deposits and making loans, helping our customers to achieve their financial aspirations. Part of what sets regional banks apart is an emphasis on commercial and industrial lending to small- and medium-sized businesses. Smaller community banks find this role difficult to fulfill; the larger money center banks abandoned it long ago.

Regional banks are mid-sized institutions, larger than local community banks, but significantly smaller than the big money center banks. We are small enough to have strong bonds with their local communities and have enough scale to deliver the financial services needed to help mid-size businesses and industry to create and grow jobs.

Regional banks typically have a community presence in a geographic region, usually operating a strong retail branch network in several states. Taken together, the assets of the top 15 regional banks equal the size of about one of the Wall Street banks.

 

How are regional banks different from other banks?

Regional banks are the “sweet spot” of banking. They are small enough to have strong bonds with their local communities and have enough scale to deliver the financial services needed to help mid-size businesses and industry to grow. Smaller community banks often lack the capital to lend on the same scale as regional banks, while the larger money center banks abandoned the practice many years ago.

 

What do regional banks stand for?

Regional banks stand for a tailored, balanced regulatory structure that acknowledges risk is not measured by asset size alone, but instead accounts for the diversity and resilience of community, regional and money center banks. Regional banks have a superior record of solid long-term business strategies that meet the needs of their communities.

Congress and regulators should recognize the risks and operations of regional banks are different than the large Wall Street institutions. The regulatory structure for regional banks should account for risk, assuring safety and soundness without burdening community economic growth. A regulatory approach based on asset size alone does not serve the public or their communities, and diverts regulatory scrutiny from its proper focus: those systemic activities that pose the greatest potential risk to the United States and global financial system.

We support regulation according to risk and business activity, not arbitrary rules that needlessly burden American commerce and industry.

 

What is systemic risk?

The simplest way to measure a traditional bank’s risk is to determine its ability to collect from borrowers and meet the claims of depositors. Banks that manage their risks well invest in the communities in which they operate and deliver a profit for their investors. Those unable to adequately manage risk ultimately fail, without consequence to the broader financial system.  Systemic risk, on the other hand, involves the chance that a financial institution’s failure would result in the collapse of an entire financial system or market, triggering a financial crisis.

 

Are regional banks high risks?

From almost every risk perspective, regional banks are safe and sound: predominantly funded by deposits, characterized by high loan volumes with little in the way of risky capital markets activities. Our trading assets are less than one percent of their total assets, as are their broker dealer assets. Regional banks have less than one percent of the industry’s total credit default swap exposure. All of the derivatives contracts traded by regional banks total less than one percent of the total traded by the banking industry.

A recent Department of Treasury study used risk criteria of size, interconnectedness, complexity, global activity, and dominance in certain customer services (substitutability) to examine the systemic risk of the largest U.S. banks. The study concludes that JP Morgan Chase has a systemic risk score of 5.05 percent and Citigroup a score of 4.27 percent. None of the regional banks listed in the report have systemic risk scores exceeding 0.35 percent, in part because the business model that regional banks operate is one of traditional lenders.

 

What makes regional banks less risky?

Regional banks are focused on consumer and small- and medium-sized business lending, with much of our assets coming from these core deposits. In contrast, the larger Wall Street banks have large percentages of trading and broker dealer assets, as well as other risky capital markets activities.

 

Are regional banks regulated as if they are larger Wall Street money center banks?

Under Dodd-Frank, regulators oversee regional banks with assets of $50 billion in the same category as giant Wall Street money center banks with trillions in assets. Federal Reserve Board (FRB) Governor Daniel Tarullo, in a 2014 speech, asked, “The key question is whether $50 billion is the right line to have drawn,” questioning whether “resolution planning and the quite elaborate requirements of our supervisory stress testing process” are necessary for all banks larger than the arbitrary $50 billion figure.

Others have joined Tarullo – including Dodd-Frank authors Chris Dodd, Barney Frank and FRB leaders Janet Yellen and Ben Bernanke – in suggesting that the $50 billion threshold is not the best way to capture systemic risk and that changes would improve the regulatory framework.

 

What difference does the regulatory regime for regional banks make for me?

Regional banks operate in all 50 states focusing on traditional lending, providing more than $1.7 trillion in loans in local communities. As mid-sized institutions, regional banks are small enough to have strong bonds with local communities and enough scale to deliver the financial services needed to help mid-size businesses and industry grow and create jobs.

Regional banks invest in their communities with over $500 billion in commercial real estate loans, $400 billion in commercial and industrial loans, more $50 billion in small business loans, $2.3 billion in Small Business Administration loans and $6 billion in farm loans.

Regional banks employ nearly 400,000 Americans and spend more than $15 billion a year on local companies for vendor services. Regional bank employees contribute over a million hours of volunteer service every year.