6 SEPTEMBER / OCTOBER 2017 This redundant data-gathering takes time, slows the proces, and may weaken a community bank’s lending ability. Thus the regulation induces the opposite effect of its intent, with fewer banks making fewer loans to the small businesses that were to have been served. This is not a small issue. Small business is a powerful economic driver, and any time a small business fails to obtain a loan, the usurped opportunity to grow and to create jobs resonates beyond the walls of that particular business to the community at large. Multiply that negative economic impact by thousands of small businesses nationwide, and this single example of burdensome overregulation translates into a heavy economic toll on Americans everywhere. On an encouraging note, however, lawmakers have been hearing your voices, and momentum is now building to relieve the regulatory burden. The CLEAR Relief Act of 20171 provides for commonsense relief, and the bipartisan Regulatory Accountability Act addresses overregulation in multiple industries. Additionally, in June the House passed the Financial CHOICE Act2, which streamlines regulation in multiple areas. At the Indiana Bankers Association, we will continue to advocate for regulatory relief, and ask for your help through grassroots engagement. Easing the burden will benefit your bank and the community it serves by allowing you to do what you do best – conduct the business of banking as stewards of safety, soundness and profitability. HB Red tape is a red flag to bankers. Banking is a business of serving the public with efficiency and profitability, enabling communities to prosper. Any impediments to progress – e.g. red tape – can threaten banks’ ability to meet the diverse financial needs of consumers. What is red tape? Merriam-Webster dictionary defines it as: “official routine or procedure marked by excessive complexity which results in delay or inaction.” The term has been around since the mid1700s, when red tape literally was used to secure official documents. At some point the elegant red binding became too much of a good thing, and “red tape” took on a negative meaning. The banking industry strives to reduce red tape in the form of overregulation as much as is reasonable, while retaining an appropriate level of procedures to ensure safety and soundness. For all depository financial institutions, safety is paramount. What is clear to bankers, but not necessarily to the general public, is that banks serve consumers by holding, lending, exchanging, issuing or transmitting funds in a manner that benefits both the consumer and the financial institution. Each transaction needs to be as streamlined as possible, while adhering to prudent standards of safety, in order for both the customer and the bank to register a profit. This is where red tape comes in. When the procedures required of a bank become so complex as to impede functionality, the mutually beneficial relationship between the customer and the bank is impaired. In these days of heightened emotions and conflicting political messages, plus memories of the financial crisis of 2008, there is much confusion about the role of banks in free market economics. In fact, perhaps your customers and others in the community have been asking why the banking industry advocates for regulatory relief. If you are fielding these questions, this is an opportunity to engage in productive dialogue. You can explain that, when you talk to legislators about easing the regulatory burden, you are advocating not only for the financial wellbeing of your bank and shareholders, but also of your customer base. Market economics dictate that a bank, as a for-profit institution, must act in the best interest of its customers, or those customers will go elsewhere. For that reason, the issue of overregulation is not an either/or scenario, with banks on one side of the fence, and consumers on the other. Instead, both parties share the same goal of achieving prosperity. Adding to current confusion is the conflict between regulatory intent and reality. While the intent of a regulation may be for the greater good, its outcome and effects can thwart that good intent. For example, Section 1071 of the Dodd-Frank Act requires the Consumer Financial Protection Bureau to collect and report data on banks’ small business lending in a detailed manner, similar to the reporting requirements already in place through the Home Mortgage Disclosure Act. Amber R. Van Til President and CEO Indiana Bankers Association avantil@indianabankers.org @grbanker VANTAGE VIEWPOINTS VIDEO BONUS The Indiana Bankers Association has moved to a new location at 8425 Woodfield Crossing Blvd., Suite 155E, Indianapolis. Tina Schmitt of Freedom Bank, Huntingburg, attended one of the first educational events held at IBA’s new home. To view her impressions, click on the video icon above in HB Digital online. 1 CLEAR = Community Lending Enhancement and Regulatory Relief 2 CHOICE = Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs
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