WASHINGTON - U.S. Senators Roger Wicker, R-Miss., and Tammy Duckworth, D-Ill., have introduced legislation to help small community banks by exempting them from requirements designed for larger financial institutions.
“Small community banks should not have to meet the same capital requirements meant for much larger institutions,” Wicker said. “Removing these hurdles would help to ensure that these smaller banks can invest in their communities and give Mississippians the opportunity to own their first home or start a small business.”
“I'm glad to join Senator Wicker in introducing targeted commonsense relief for a small number of community banks from regulations that were intended for the largest international banks and those at the center of the 2008 financial crisis,” said Duckworth. “This bipartisan legislation will free up access to credit for Illinois small businesses, first time homebuyers and help affordable housing construction -- all while keeping intact capital protections for the large banks that need them.”
The legislation would target the punitive treatment of Trust Preferred Securities held by community banks under Basel III capital rules. These rules were created in the wake of the financial crisis and are being implemented over a four-year period which began January 1, 2015. Approximately 30 community banks, including nine in Mississippi and four in Illinois, were severely affected by the rules. Some banks had been operating for over 100 years and were well-capitalized before Basel III.
Burdensome regulations and rules like this provision have caused small banks in rural areas to consolidate with larger banks, leaving some communities without local banking options. This legislation would provide a level playing field and ensure local communities have access to banking services.
The total amount of capital affected by the Basel III rules is estimated to be approximately $250 million, which has directly impacted community banks’ lending capacity. If the provision is eliminated, community banks could realize additional lending capacity in excess of $2.5 billion.
The bill is cosponsored by Sens. Thad Cochran, R-Miss., and Tammy Baldwin, D-Wis.