Some relief may be in store for small banks struggling to keep up with regulations imposed by the 2010 financial reform law.
The Community Lending Enhancement and Regulatory Relief Act applies to all banks with less than $10 billion in assets, which includes all Idaho state-chartered banks.
The bill was introduced by Rep. Blaine Luetkemeyer, R-Mo., in April and has been referred to the House Committee on Financial Services.
The Dodd-Frank Act was passed in response to banking practices that helped cause the financial meltdown and mortgage crisis that contributed to the Great Recession and its slow-growth aftermath. But it hamstrung small banks by heaping new rules that required additional staffing to ensure compliance, says Mike Mooney, Boise-area regional president for the Bank of the Cascades.
"We've always been held to high standards, but reporting and compliance have become much more onerous," Mooney says. "It's not a question that it costs more. It's taken attention away from taking care of customers and put it on the compliance side."
The bill would expand on the exemptions for small banks from Dodd-Frank, including escrow requirements. It would loosen restrictions on debt-to-equity ratios and raise the ceiling on the number of mortgages small banks can service in a year from 5,000 to 20,000.
Mooney says the mortgage servicing rule change would directly affect Bank of the Cascades.
"It would be a little break for small servicers of 20,000 mortgage loans or less, which is the world I live in," Mooney says.
Peter Crabb, professor of finance and economics at Northwest Nazarene University in Nampa, says the bill's greatest benefit for small banks would be expanding the list of rules small banks are exempted from, many of which haven't yet been written. But the bill doesn't spell out what those exemptions are, making the bill hard to evaluate, Crabb says.
"This will be a positive if small banks could be relieved of some of that regulatory action. But the current bill is vague," Crabb says. "It just says 'provide adjustments or exemptions.' It doesn't say what those would be."
Mooney says an explicit list of exemptions would be helpful as his bank tries to keep up with the growing number of rules. He says he's confident the list will be ironed out over time if the bill passes. Any regulatory relief would help, he says.
"This should help us compete with big banks," Mooney says. "Community banks spend an inordinate amount of money on compliance trying to make sure we follow all the rules."
Crabb says he feels less rosy about the game of wait-and-see.
"The bill leaves me kind of saying, 'Well, so what?' This is a nice bill, but it won't have a big effect on the industry."
Zach Kyle: 377-6464