Pub. 4 2014-2015 Issue 2

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 September • October 2014 5 Size Doesn’t Matter The true measure of a company’s success is based on the view of the customer’s experience. It goes beyond being on a first name basis. Is the relationship bringing real value that’s impacting the company’s business goals? Would they refer the bank to a colleague? For centuries, community banks have strived to be more than just another outlet for a business or personal loan. The business model is centered on partnering with local small to midsize businesses and individuals to move our local communities forward. That means giving customers the support and financial tools to grow and create local jobs, or simply buy a home. As clients are able to increase their deposits in the bank, we then seek out other local businesses and customers that need growth capital or want to buy a home. This model keeps our customers’ money in Colorado, working to help our local community thrive. This portfolio bank business model is simple and should be regulated as such. Recently, the Conference of State Bank Supervisors produced a paper discussing the importance of designing a federal regulatory framework that appropriately identifies smaller institutions’ relationships as a portfolio-based lend- ing business model. You can review the paper entirely at: http://goo.gl/HZv4CD This paper was drafted by a variety of experts involved in the financial regulation and policy space. To arrive at the conclusion of this study, a working group of the Conference of State Bank Supervisors and the Federal Reserve system co-hosted an inaugural community bank research confer- ence at the Federal Reserve in late 2013 to discuss issues regarding regulatory burdens (including Dodd/Frank, Basel III, and the scope of the CFPB and QM issues) on portfolio bank business models. From these meetings, a written paper of the conclusion was produced. The paper suggests that Congress and federal regulators must better support the community bank business model by designing regulations and examination practices that accurately account for the lending model, no matter the size. Arbitrarily picking a number divides the industry unnecessarily. A better approach, as stated in this study, is to recognize the differences and complexities through business lines and business models, then properly account for the regulatory requirements necessary based on each business model, not size of the institution. CBA and ABA are pushing for mortgage regulatory relief bills like H.R. 2673 (making portfolio loans automatically compliant with ATR and QM); however, a broader conversa- tion should take place about the distinction between banking business models for large and very complex banks and a “PortfolioBankBusinessModel” which has been enormously successful in helping America’s economy throughout the last century and numerous economic cycles. Please spend the time to review the paper. The more we use common language and are aware of independent studies of regulatory “right sizing,” the more persuasive we can be to policy makers and those making rules for regulatory agencies. To be continued… Jeff Schmitz Chairman Colorado Bankers Association n