The Senate is expected to vote within the coming week on legislation aimed at aiding small community banks.
The bill, co-authored by Sen. Heidi Heitkamp, D-N.D., is meant to roll back some of the paperwork and regulations that have hampered small banks.
After the housing crisis and financial collapse of 2008, banking regulations were tightened to prevent a similar disaster. But for smaller banks not involved in the making of the downturn, the regulations made it harder to do business due to the manpower needed for compliance.
“Small banks don’t deserve to bear the cost because our larger institutions failed us,” Heitkamp said.
In the past 30 years, the number of community banks and credit unions has dropped by about two-thirds, yet more than 80 percent of North Dakota deposits still go to community banks, according to Heitkamp’s office.
Barry Haugen, president of the Independent Community Banks of North Dakota, said a good portion of his membership spends an inordinate amount of time on regulations.
“It’s a great start,” he said of the relief bill.
The legislation, should it pass, allows any bank with less than $3 billion in assets to ascribe to an 18-month examination cycle, rather than every 12 months. It also reduces requirements for issuing mortgages.
Of Haugen's 60 association members, more than half have less than $100 million in assets and most were only offering five or six mortgages a year, said Haugen, adding that regulatory changes would provide the banks and their customers with options.
The bill also exempts banks with less than $10 billion in assets from certain capital requirements and allows banks with less than $3 billion in assets to operate with higher levels of debt.
One area of contention from critics of the bill relates to raising the asset level for banks subject to stricter regulations. It still requires stress tests for all banks above $100 billion in assets but calls on the Federal Reserve to tailor regulations for banks in the range of $100 billion to $250 billion.
“The majority of the changes are focused, and we don’t see it opening up something catastrophic,” Haugen said.
It also stops credit reporting agencies from including medical debt in reports for veterans, provides immunity from liability to certain people who disclose suspected exploitation of seniors, protects tenants from foreclosure, and in the wake of the Equifax breach, requires credit reporting companies to provide free freezes of credit data.