The calendar has flipped to 2018—a new year filled with great expectations. Will this be the year that comprehensive congressional regulatory relief for community banks finally happens?
Many communities throughout Texas have seen their local banks shutter or be absorbed by larger institutions over the last several years because laws and rules, intended to curb the abuses of the nation’s largest “too-big-to-fail” banks, have instead trickled down to negatively impact the smallest. “Too-small-to-survive” is a term used to describe this. Urban and rural communities alike have seen a consistent wave of mergers and acquisitions in community banking. According to federal data on the nation’s 1,980 rural counties, approximately one-third don’t have a local bank and many have no bank at all.
Here in Texas, we’ve lost nearly one-third of our banks since 2009.
Without local banks, communities are starved of the capital they need for business growth and economic development. Community banks with less than $10 billion in assets provide more than 60 percent of all small business loans under $1 million and more than 80 percent of all agricultural loans—both of which are extremely important in our great state.
Only Congress holds the key to unchain community banks from the burden pushing them toward consolidation. There is hope that 2018 is the year that our political leaders will finally get a bill across the finish line. For years now there has been bipartisan support to make this happen but as things often go in D.C., the efforts have repeatedly stalled.
Late last year, the Senate Banking Committee passed the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155)—legislation that would truly bring meaningful community bank regulatory relief. It is focused on community banks and the customers they serve. And it was introduced with 20 bipartisan co-sponsors—a very promising sign in today’s divisive political climate. As half of the co-sponsors are Democrats, there should easily be enough votes to bring this important bill up for a vote and ensure its passage.
Texans and consumers nationwide will be the big winners as the benefits of the legislation extend to community bank customers, not just the banks themselves. Overall, the bill provides relief from the regulatory burden of reporting and various other requirements, which frees up resources so community banks can lend more and continue to offer competitive products and services.
Most notably, the bill will help thaw mortgage availability for community bank customers. Mortgage rules established after the financial crisis have made it difficult for community banks to loan to customers who do not qualify for a traditional 15- or 30-year mortgage. This bill will allow flexibility in working on terms and covenants consistent with the customer’s needs so long as the bank keeps that loan on their books, which is common among community banks. Larger banks, on the other hand, generally sell the vast majority of mortgages they originate into the secondary market.
Among the favorable consumer provisions contained in the bill, it calls for a free annual credit report freeze for consumers, especially helpful with the seemingly endless news of data breaches, including last year’s massive Equifax breach. I wish I could say these breaches will stop, but sadly that’s just not true.
On behalf of Texas’ more than 2,000 community banks and branches—and the bankers who are committed to seeing their towns prosper and customers’ dreams come true—I ask you to take a stand with me. Support your local bank by bringing your business there, where your money will be reinvested in your community. It’s that simple.
We need your help preserving locally owned and controlled independent community banks to sustain and bolster economies across Texas. Here’s to the passage of much-needed regulatory relief and the strength of every Texas community we call home.
Williston is president and CEO of the Independent Bankers Association of Texas, the largest state community banking association in the nation.