BRADENTON — Local community bank officials are taking issue with new proposed government regulations they see as too restrictive, unnecessary and unfair.
“We don’t believe we need further regulations,” said Alan Langford, president of Manatee River Community Bank. “We’re Federal Deposit Insurance Corp. banks; we’re already in a highly regulated industry.”
Regulations from the Department of Treasury aim at strengthening supervision of the banking industry in light of the financial crisis that has seen bank failures and instability in the industry. The regulations outlined in an 89-page report would create a Consumer Financial Protection Agency, eliminate the Office of Thrift Supervision, provide stricter requirements for on-hand capital and create a national bank supervisor position.
The treasury department, in its evaluation of financial firms, found risk management systems weren’t up to speed on the complexity of new financial products, there is a lack of transparency and standards for securitized loan and too much investor reliance on credit rating agencies.
Community bank officials say they are being made to pay for mistakes made by larger financial institutions.
The biggest concern for community banks is the creation of the Consumer Financial Protection Agency, which will be supported by fees collected from banks and will supervise consumer financial products and services such as credit, savings and loans in an effort to protect consumers from financial abuse.
“We don’t need any more regulation and we don’t need any more fees for God sakes,” said Bill Sedgeman, chairman of Community Bank in Bradenton.
Sedgeman said regulation from the FDIC and the Florida Office of Financial Regulation is adequate supervision.
Community Bank is expected to pay more than $600,000 in regulation fees this year. In 2008, Community Bank paid regulation fees of $228,221.
“In terms of my view, we’ve got adequate avenues or venues for regulation of our industry,” Sedgeman said.
Under the FDIC, safety and soundness regulators evaluate a bank’s overall financial condition and credit card activities.
The Independent Community Bankers Association is concerned adding the Consumer Financial Protection Agency will create confusion regarding supervision responsibilities, said Chris Cole, vice president and senior regulatory counsel of the Washington, D.C.-based group.
“We don’t like the idea of divorcing consumer compliance from the safety and soundness (regulation),” Cole said. “Our concern is conflicts between the new agency and the safety and soundness regulators.”
Alex Sanchez, president of the Florida Bankers Association, said the proposed regulations exclude institutions not regulated by the banking sector. According to the Obama administration, 94 percent of high-cost mortgages occurred outside the regulated banking sector.
Sanchez said it is time these financial firms adhere to the same supervision standards and capital requirements as banks.
“Why is the Consumer Financial Protection Agency going to go after banks?” Sanchez asked. “We already believe in consumer protections. Why don’t we go after the real bad guys?”
But a majority of the institutions responsible for subprime loans that caused the financial mess were owned or backed by large banks.
The Center for Public Integrity analyzed $7.2 million high-interest loans written from 2005-07 and found 21 of the top 25 subprime lenders were financed by banks that received bailout money.
Among them were staples such as Bank of America, Citigroup, Merrill Lynch and Lehman Brothers that made profits from the high-priced lending market.
The House Committee on Financial Services is in the process of hearing testimony from industry officials on the proposed regulations.
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