(Adds banker comment)
By David Lawder and Amanda Becker
WASHINGTON, March 9 President Donald Trump
promised in a meeting with community bankers on Thursday to
strip away some Dodd-Frank financial regulations and ensure they
can continue giving small businesses access to capital.
Trump, joined by National Economic Council Director Gary
Cohn and Treasury Secretary Steve Mnuchin, said community banks
play a "vital role" in the U.S. economy.
"Nearly half of all private-sector workers are employed by
small businesses. We must ensure access to capital to small
businesses and for small businesses to grow. Community banks are
the backbone of small business in America," Trump said at the
beginning of the meeting.
Representing the industry were chief executives of nine
community banks with assets of around $1 billion or less and the
heads of the American Bankers Association and the Independent
Community Bankers of America (ICBA).
Bankers who attended the 45-minute meeting said they
discussed the role community banks play in rural areas and
provided real-world examples about the difficulties smaller
banking institutions face.
The bankers emphasized the need for "tailoring regulations
to fit the size and complexity of banks," said Chesapeake
Financial Shares Inc Chairman and CEO Jeffrey
Szyperski, one of the bankers in the meeting.
Chesapeake is a regional bank headquartered in Kilmarnock,
Virginia, that has 14 branches and a separate wealth management
"We were very focused our message on how do we create a
tiered and proportionate regulatory environment for community
banks," said Rebeca Romero Rainey, head of Centinel Bank of
Taos, a community bank in New Mexico.
The idea seemed to resonate with Trump, who asked questions
and showed a pre-existing understanding of the community banking
landscape, according to those in attendance.
ICBA, one of the industry groups at the meeting, has
advocated a tiered system of regulations that tailor regulations
to a bank's size, business model, complexity and risk.
"The type of regulation that you need for a $700 million
bank and the risks they present are very different than those
for a $200 billion bank or a $1 trillion bank," a White House
official said before the meeting.
Larger banks are able to spread their higher compliance
costs over much bigger asset and employee bases, while smaller
banks struggle with high costs and workloads.
One of the institutions participating, Standard Financial
Corp of Monroeville, Pennsylvania, has just nine
branches with $488 million in assets and earnings of $559,000 in
the quarter ended Dec. 31, 2016. It plans to merge with a rival
in southwestern Pennsylvania in a deal that will roughly double
Trump officials cited a dearth of applications to form new
community banks and around a 30 percent drop in the number of
small U.S. banks since 2008 as the impetus for the meeting. A
smaller bank has gone out of business every day for the past
seven years, Szyperski said, citing the Dodd-Frank financial
reform law enacted after the 2007-2008 financial crisis as a
reason new banks had not formed in their stead.
Trump promised the bankers that his February executive order
on reducing regulation was "very powerful" and would apply to
the community banking sector.
Mnuchin, the former CEO of OneWest bank, a regional lender
in Southern California, said at his confirmation hearing in
January that onerous regulations are "killing community banks."
He pledged to ease those burdens while maintaining "proper"
regulation, "so that we don't end up with a world where we only
have four big banks in this country."
Also discussed at the meeting were the compliance costs
associated with the Consumer Financial Protection Bureau (CFPB),
a new regulator created under Dodd-Frank.
The CFPB is a perennial target for Republicans, who want to
shift its funding from the Federal Reserve to annual
appropriations by Congress and shift its management, now
concentrated in a powerful chairman, to a multi-person
Separately on Thursday, when asked during a briefing with
reporters whether Trump still backs his campaign pledge to
restore the Glass-Steagall Act, White House spokesman Sean
Spicer said that he did. The law, which separated commercial and
investment banking activities, was repealed in 1999 and, if
reinstated, would mainly apply to larger banks.
The Trump administration has not made any moves thus far to
break up big banks. Investors have bid up bank stocks since
Trump's election on expectations they would get regulatory
relief but not be forced to divest. There is little indication
such legislation is an imminent priority that will be taken up
by the administration or the U.S. Congress.
(Additional reporting by Roberta Rampton and Emily Stephenson;
Editing by Chizu Nomiyama and Jonathan Oatis)