Opinion

Sensible financial regulatory reform will better serve consumers

Posted July 13

The financial services industry is watching with interest and hope as members of the U.S. House and Senate address regulatory reform.

As a banker, I welcome Congress scrutinizing the current regulatory regime. While sensible regulation of the financial services industry is necessary, I believe some current regulations go too far, hurting consumers and small businesses in Utah and other states that want to responsibly use credit to purchase homes, start and expand small businesses and purchase equipment.

Harris Simmons, CEO and chairman of Zions Bancorp, recently wrote a column in American Banker newspaper in which he stated:

“It’s time for our leaders in Washington to promote a regulatory environment that encourages business creation and growth. Support for regional banks benefits entrepreneurs, homeowners and other consumers who rely on these straightforward banks for loans and banking services. … We can usher in a new period of economic growth by freeing up regional banks to do their jobs.”

Since the Dodd-Frank Act became law about seven years ago, banks have been overwhelmed with some 25,000 pages of rules. Compliance costs have soared as banks have hired armies of attorneys and accountants to comply with regulations and prepare for audits.

In some cases, our customer relationships have been damaged because of rules that don’t take into account local and individual circumstances. It is unfortunate when we can’t extend credit to individuals and businesses we know are safe risks.

Responsible and reliable credit makes the economy go. If citizens can’t purchase a home or start a small business, the economy quickly wilts.

Along with sensible government regulation, the free market and competition also apply an innate, natural form of regulation. Banks won’t stay in business long if they make irresponsible loans. And customers won’t trust banks with their money if they don’t keep that money safe. Those are powerful incentives for banks to act responsibly, without heavy-handed regulation.

In his column, Harris points out the significant differences between community/regional banks and the large Wall Street banks, and argues that regulations shouldn’t treat them as though they are identical.

“Thanks to the one-size-fits-all $50 billion asset threshold for systemic-risk designation, regional banks have seen their costs rise, and their capital strained. Customers end up as victims, as banks have less flexibility to customize products to meet clients’ needs, and as the price of banking services increases to pay for this much more complex regulatory environment. If regulations on regional banks were eased, those banks would have additional capital — as much as $4 billion each year — to lend. … It is clear that the current system does not work.”

Utah Sen. Orrin Hatch, chairman of the Senate Finance Committee, has been blunt in his criticism of the Dodd-Frank Act, calling it “one of the worst bills that’s ever been passed through Congress. … To treat all these banks like they're a bunch of crooks and you have to watch everything they do is, I think, beyond the pale.”

In June, the U.S. House passed the Financial CHOICE Act, scaling back portions of the Dodd-Frank regulations and improving consumer and small bank access to credit.

Love said, “Community banks, which provide the majority of small bank loans, have been closing at the rate of one per day. The CHOICE Act is a bold step toward achieving faster economic growth and expanded economic opportunity for every American.”

Rep. Jeb Hensarling, R-Texas, House Financial Services chairman, said, “… Dodd-Frank represents the greatest imposition of regulation on our business enterprises of all Obama-era regulations combined. We will be continually shackled to a 1.5 (percent) to 2 percent (gross domestic product) economy until we get rid of Dodd-Frank.”

We encourage the House and Senate to enact and send to the president legislation that sensibly regulates regional and community banks.

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