During her testimony before the U.S. House of Representatives Financial Services Committee on Tuesday, the Office of the Comptroller of the Currency's (OCC) Chief Counsel Amy Friend addressed issues regarding the regulatory burden faced by small banks.
In a prepared statement, Friend noted that, "Although regulations implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) have focused generally on larger institutions, certain provisions of the Act affect the entire banking sector. These changes can strain the more limited resources of community banks."
Friend's analysis lends credence to a survey recently published by the Mercatus Center, a research center at George Mason University aimed at studying markets. The survey reported that smaller banks are less able to deal with the more regulation-heavy Dodd-Frank Act, leading to changes in some small bank's core businesses.
"Of the surveyed banks, nearly 6 percent already discontinued residential mortgages and an additional 10 percent anticipate doing so. Although those numbers may seem small in the scope of the national mortgage market, discontinuations will ripple through the communities these small banks serve," the center's survey found.
The testimony by Friend before the Financial Services Committee offered a conciliatory nod to the plight of smaller banks, while noting particular ways the OCC addresses smaller bank's particular grievances with the Dodd-Frank Act.
"We recognize that community banks have different business models and more limited resources than larger banks, and, to the extent underlying statutory requirements allow it, we factor these differences into the rules we write and the guidance we issue," Friend said.
Friend continued, citing specific examples of how the OCC attempts to minimize the regulatory burden on smaller institutions: "Explaining and organizing our rulemakings so these institutions can better understand the scope and application of our rules, providing alternatives to satisfy prescriptive requirements, and using exemptions or transition periods, are examples of ways in which we tailor our regulations to accommodate community banks while remaining faithful to statutory requirements and legislative intent."
Friend also cited an issue from June 2013 when the OCC responded directly to community bank concerns when finalizing the revised lending limits rule, which "now exempts from the lending limits calculations certain securities financing transactions most commonly used by community banks."
She also noted that understanding large volumes of information can be difficult for smaller institutions. Friend commented the OCC, when transmitting a new regulation or supervisory guidelines, provides community banks with a box that allows them to quickly assess whether the issuance applies to them and if so, the impact of the new guideline.
Friend concluded, "Although the institutions we supervise continue to face challenges, the state of the national bank and federal thrift system is strong. The OCC will continue to look for opportunities to minimize burden, wherever possible."