State Regulators Call for an End to One-Size-Fits-All Bank Regulation

Washington, D.C. – Given the important role community banks perform in the U.S. economy, state regulators today recommended regulatory reforms that are appropriate for smaller, less complex banks that do not pose systemic risk.

At a hearing of the U.S. Senate Committee on Banking, Housing and Urban Affairs, Charles G. Cooper, commissioner of the Texas Banking Department and immediate past chairman of the Conference of State Bank Supervisors, recommended four key changes:

  • Adopting an activities-based definition for community banks, which lawmakers and regulators can use to exempt smaller banks from regulations aimed at larger banks
  • Reducing the complexity of capital rules for smaller banks
  • Exempting from certain regulations community banks that retain mortgages in portfolio
  • Improving the transparency and timeliness of fair lending supervision

Community banks provide about 45 percent of small loans to U.S. businesses and three-fourths of agriculture loans. But “community banks are disproportionately burdened by oversight that is not tailored to their business model or activities,” Cooper said.

Speaking on behalf of state regulators who oversee 78 percent of U.S. banks, Cooper called on Congress to abandon a one-size-fits-all approach to bank regulation and, instead, tailor regulations to different kinds of banks. He concluded: “I have seen many swings of the regulatory pendulum. Extreme swings to either side are wrong. We must all seek ways to ensure a balanced approach.” Cooper’s testimony is available here.