Why the House should pass the banking bill

Community bankers have waited for years for Congress to update our banking laws so Main Street institutions aren’t burdened by Wall Street regulations. Following last month’s rare bipartisan vote in the Senate to advance a plethora of reforms, we’re still waiting.

The holdup is in the House of Representatives, which over the years has passed numerous bills reforming Dodd-Frank Act policies only to see them falter in the Senate. Now that the upper chamber has passed substantial reforms on a bipartisan 67-31 vote—and the president has pledged to sign it into law—the House should seize this opportunity to pass the measure.

{mosads}Community bankers fully appreciate that House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and others in the House want to expand the Senate bill. After all, Hensarling is a friend of community banks, which have long advocated a slew of reforms to make banking rules proportionate to our smaller size, lower risk and relationship-based business model.

But community bankers also recognize the political realities of Washington, particularly in this era of hyper-partisanship. The delicate bipartisan coalition that delivered votes from 16 Democrats and one Independent in the Senate after nearly two full weeks of floor time is a rare example of bipartisan momentum. Expanding the bill in the House risks killing it altogether and leaving community banks, local communities and Hensarling with nothing to show for years of advocacy and dedication to Main Street America.

For now, community bankers would rather consolidate the many beneficial policies contained in the deal crafted by Senate Banking Committee Chairman Mike Crapo (R-Idaho) and moderate Democrats to boost local lending and economic growth. For instance, the bill would bolster small-business lending by simplifying community bank capital mandates and other complex regulations, which a February 2017 report from the Federal Reserve Bank of Dallas identified as the most prominent factor limiting lending to small businesses.

Further, the Senate measure would ensure that the mortgage loans that community banks hold on their books—and for which they carry 100 percent of the credit risk—meet federal “qualified mortgage” standards. The idea here is to expand access to mortgage credit after an Independent Community Bankers of America survey released in 2015 found that three-quarters of community bank respondents said regulations are keeping them from making more residential mortgage loans.

Collectively, provisions like those allowing well-rated community banks to undergo less-frequent examinations and file more targeted quarterly financial reports will help offset the excessive industry consolidation caused by one-size-fits-all regulation. Virtually every community banker who told the Federal Reserve and Conference of State Bank Supervisors in a recent survey that they are considering an acquisition offer cited the burden of regulatory costs. And the Federal Reserve Bank of Richmond has found that compliance costs have played an important role in the declining formation of new banks.

While the Senate bill is not a regulatory panacea for every community bank or our increasingly concentrated banking system, it is an important down payment from a Congress charged with making laws. Community bankers will continue advocating common-sense reforms, but we should take the opportunity to lock in what has already passed the Senate. A rising tide lifts all boats. And with community banks making more than 60 percent of all small-business loans and 80 percent of all agriculture loans, Congress is at the precipice of improving the economic and regulatory environment in which all community banks and local communities operate.

No one is more appreciative of the role of the House and Hensarling in advancing regulatory reforms than community banks. The chamber has worked for years on these issues, even advancing more than three-quarters of the Senate bill’s provisions since the 115^th Congress convened last year. In fact, the Senate’s passage of these reforms is itself a testament to the House’s policymaking diligence.

Let’s not jeopardize this years-long effort at the last moment. Now is the time to act. Sending this important legislation to the president’s desk will complete years of hard work and help make local communities stronger and more vibrant for generations to come.

Timothy K. Zimmerman is CEO of Standard Bank in Monroeville, Pa., and chairman of the Independent Community Bankers of America (ICBA). Preston L. Kennedy is president and CEO of Zachary Bancshares Inc. in Zachary, La., and ICBA chairman-elect.