Pub. 3 2013-2014 Issue 3

6 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S A Word From CBA... Regulatory Reform Effort The CBA Board recently unanimously directed CBA to do everything it can to obtain regulatory reform at the federal level by yearend 2014 (otherwise banking waits until 2016, and the damage is done). We understand this is a huge challenge and we know the limited likelihood of success, but we have zero chance of success if we don’t make an aggressive push for regulatory reform. We believe the entire effort must be predicated on bad customer impact of regulations; public officials care about that while they don’t care about the effect of rules on banks. Regulatory relief is a priority for banks and needs to break out of the pack of legislation on credit unions, FCS, overdraft, Basel III tweaks, bank exams, housing finance, patent reform, privacy notices… Even an unsuccessful effort can increase banking’s political profile for having pushed, and while these efforts may not be successful, we have a shot. The goal is tominimize the regulatory burden on banks within the limits of what is politically achievable. We will focus efforts to identify and amend specific laws for change to delete/alter offending rules. We will build coalitions inside and outside of banking to promote passage of cor- rective legislation by yearend 2014. Collectively we will develop and execute an approach for overcoming huge barriers of Congressional partisan gridlock, significant Congressional opposition to amending DFA, and contempt for banking. We also will modify or seek delay or rollback of relevant rules or rule implementa- tion where compliance is problematic for lenders and/or borrowers. And we will consider fast tracking efforts for relief from QM and loan officer compensation (results by yearend 2013) due to the January 2014 effective date – an even more ambitious goal. We face a tough environment: • The smothering weight of regulation hurts constituents/customers by reducing access to credit for many customers, increasing its cost and driving industry consolidation (contrary to government’s often-stated objectives). Banks experience “trickle down” application of large bank practices being expected as “best practices” for smaller banks. We now see only the tip of the iceberg with great regulatory ramifications yet to come. • Almost all of the pain felt by banks comes from the federal level, particularly DFA and Basel III. • Federal regulators seem to be focused on having a rule in effect (despite its problems) rather than an effective rule. • Members of Congress don’t understand that regulators use ERM and that banks are risk averse; they and regulators don’t comprehend that banker caution means they will not make loans if they are not comfortable with compliance readiness, and the risks of regulatory criticism, software readiness, litigation, loan performance… • There is significant opposition to amending DFA; inventive techniques will be needed to successfully advocate targeted DFA changes by a bipartisan coalition. • Partisan gridlock in Congress, other forces and negative public opinion of banking will preclude regulatory reform changes unless significant constituent impact can be demonstrated. • Regulators are single minded and minutely focused on assuring bank safety and soundness and compliance regardless of impact on banks or customers, when they really need to foster and facilitate credit availability so long as it is provided in a safe and sound manner. • Despite community bank-friendly rhetoric by national political leaders, the federal government is prompting industry consolidation and abandoning the dual banking system by its pervasive preemption of state law. This is an ambitious effort that has the odds against it. Nonetheless, CBA feels that is what we need to do to The goal is to minimize the regulatory burden on banks within the limits of what is politically achievable.  A Word From CBA  continued on page 11