Idaho bankers don’t know exactly what to expect from Congress and President Donald Trump as they look for the repeal and revision of key regulations.
Little is known about plans in Congress on several issues, said Trent Wright, president of the Idaho Bankers Association.
Idaho bankers are hoping to see several changes to parts of the Dodd-Frank Act, a sweeping law passed after the Great Recession that imposed a large documentation burden on banks. Wright said bankers would also like to see Congress slow down the rate at which new banking regulations are created.
“Our expectation is that Dodd-Frank will not be repealed, but we hope that brakes will be put on it and that it will be examined to make sure that each regulation is the best use of a bank’s cash flow,” Wright said. “When Dodd-Frank was passed, they left all existing regulations in place so Dodd-Frank was added on top of everything else.
“A majority of the rules for Dodd-Frank have still not been written, but we are trying to comply and catch up with existing rules,” he said. “We want to see an examination of the rules already in place to ensure they are needed before proceed with any of the rules not written yet.”
Mary Hughes, finance institutions bureau chief at the Idaho Department of Finance, said most bankers agree with Wright. They just want to have steady regulations in place and time to adjust before new regulations are implemented.
“We do a CEO roundtable with banks every year and last year the biggest message we heard was that they just wished federal regulators would stop changing the rules,” Hughes said. “Every time there is a change it takes away resources from other parts of the bank as they work to comply.
“Most bankers just want to go on with the processes they have in place as a result of Dodd-Frank,” she said.
One method of reform that could help would be creating more tiers of regulation. Wright said some rules intended for large national and international banks have a fairly low capital requirement, forcing community banks to comply.
“Something we want Congress to look into is tailoring legislation to the size of a bank,” Wright said. “A community bank with less than $100 million in assets is different than one with $5 billion, or $10 billion or $50 billion or $100 billion”
“There is no one-size-fits-all approach to banks in this country,” he said.
Rules governing mortgage lending implemented under the Dodd-Frank Act have harmed the industry, Hughes said.
“It has affected our banks in many ways,” Hughes said. “Stricter mortgage rules have made it harder for banks to participate and increased costs of compliance have had the unintended consequence of having some banks pull out of mortgage lending all together.”
Independent Community Bankers of America, an organization of 6,000 community banks, has asked Congress to make several changes to mortgage lending regulations, including loosening underwriting and appraising requirements, and exempting banks with less than $50 billion from escrow requirements for loans held in portfolio.
Trump signed an executive order Feb. 3 calling for a review of regulations implemented under Dodd-Frank.
“It is difficult to answer what I expect will happen because even just a couple weeks into the new Congress we are seeing a lot of action,” Wright said. “But what we want is regulations that will stand the test of time and not just be switched on us again when the majority party changes.”