The Mid-Sized Bank Coalition of America (MBCA) favors policy-making that will make the banking system safe, avoid future crises and punish wrongdoing. The MBCA believes that this is best achieved when policy makers and Congress focus on the largest banks and propose rules that try to mitigate the systemic risks posed by those firms; mid-size banks simply pose no systemic risk.
With straight forward balance sheets, conservative lending practices, common sense underwriting, local leadership and Main Street DNA, mid-size banks were not responsible for the problems that brought the 2007-2008 financial crisis to its peak.
Accordingly, we do not believe that regulations intended to apply to large, complex, internationally-active and interconnected worldwide financial institutions with immense product volume and whose assets greatly exceed $50 billion should be applied in the same way to mid-size banks headquartered in Milwaukee, Memphis, Kansas City, San Antonio, and Denver, among other regional communities.
Mid-size banks should not be subjected to the regulatory treatment designed to target and mitigate the systemic risk posed by the largest financial firms. Mid-size banks simply pose no systemic risk.
The MBCA supports the reform of bank asset threshold for regulatory measures. The low asset thresholds used have multiple unintended consequences.
As a bank approaches a threshold ($10 and 50 billion), it creates a distortion in planning for natural growth and the associated growth in lending. Bank leadership is forced to consider the significant increase in operating expense imposed by crossing an artificial barrier unrelated to risk.
The imposition of the increased demands that come with crossing a threshold does not benefit the public in any appreciable way. To the contrary, they sap resources that banks instead should be deploying to extend credit and entrepreneurially serve communities. Rather than loan officers and other customer-service providers, we reallocate our budgets and engage quantitative modelers and banking consultants to prove what is already well known – none of us, individually or collectively, pose even a marginal threat to the financial system.
The ability of mid-size banks to continue to play a vital role in stabilizing the nation’s economy and making Main Street banking services more widely-available and competitive for the public is threatened by this trend of concern.
Bottom line, we believe that if an asset size determinant is necessary for the applicability of any regulation or law, it should be set very high so that it only separates the “too big to fail” banks from the rest.