Saturday, November 9, 2013

N.C. lawmakers: Regulations hurting community banks

Two Republican members of Congress who represent the Charlotte area say regulations created after the financial crisis are hurting community banks -- and resulting in fewer of them in North Carolina.

Reps. Robert Pittenger and Patrick McHenry, who serve on the House Financial Services Committee, delivered that message this week to a group of bankers during an event at Charlotte City Club in uptown. Pittenger and McHenry said smaller banks have higher compliance costs as a result of new mandates, such as those from the Dodd-Frank Act. They said the added expenses are driving banks to consolidate.

"You’re seeing a shrinkage in … community banks," Pittenger said.

Pittenger called regulations passed since the crisis "devastating" to community banks. He said it's easier for large banks to afford the higher compliance costs.

As smaller banks face the same compliance costs as large ones, "it makes sense to merge," McHenry said. "That way, you can actually deliver returns for your shareholders, your owners."

The two lawmakers also said regulations created in the wake of the crisis are hurting banks' abilities to lend.

E. Dawn Thompson, associate counsel for the N.C. Bankers Association, who attended the City Club event, told a reporter afterward that the state has roughly 104 banks and other financial institutions, a decline of about 20 over the past 18 months. Consolidations are a big factor, she said.

She pointed to Greensboro-based NewBridge Bancorp and Raleigh-based CapStone Bank, which last week announced they plan to merge. The combined bank will go by the NewBridge once the deal closes, which is expected by the first quarter.

Pittenger and McHenry have supported legislation, such as House Resolution 922, to roll back parts of Dodd-Frank, a regulatory overhaul passed in 2010 to prevent another financial crisis.

Last week, they voted in favor of the resolution, which would allow large banks to handle some derivatives trades in house instead of pushing those activities to separate corporate entities to remove them from federally insured depository institutions.

The bill, which was approved in a 292-122 House vote, now heads to the Senate. It would repeal a so-called "push-out" provision created out of Dodd-Frank.

McHenry said the bill would change a "poor" rule that resulted from Dodd-Frank.

"There are some very basic transactions that a financial institution should be able to keep within their bank, not pushing it out to an affiliate, a nonbank affiliate," he said.

Those who oppose the provision say it increases transaction costs passed on to consumers and moves swaps trading out of regulated institutions. Supporters say it prevents banks from engaging in risky trading.

According to the website Govtrack, the legislation has a 19 percent chance of being enacted.