Volcker Rule splits regional banks from Wall Street

Not ‘Hostile’

The position drew support from six members of the Senate Banking Committee, including Senators Mark Warner, a Democrat of Virginia, and Mike Crapo, a Republican of Idaho, who wrote to regulators on Feb. 16 that compliance costs “could cause some banks to exit certain types of activities that provide liquidity to their customers and are permitted by the Volcker Rule.”

Frank said the regulators have the flexibility to reduce compliance costs on regional banks. “They are assuming the regulators are stupid or hostile, and I don’t think they are hostile,” Frank said.

The Fed’s Tarullo has recognized the role of regional banks as he warns of the systemic risks posed by the largest Wall Street firms. For example, he said on June 6 that there would be a sliding scale for the capital surcharges to ease the burden on banks with over $50 billion in assets that aren’t among the largest players like Bank of America or JPMorgan.

Tarullo also suggested that if it turned out, as Wall Street banks have claimed, that Basel rules crimp their ability to lend money, then smaller institutions could fill the void.

Trade Groups

“To the degree that systemically important institutions find the additional capital requirement makes some lending unprofitable, that lending could be assumed by smaller banks that do not pose similar systemic risk and thus have lower capital requirements,” Tarullo said in a June 2011 speech.

While the regional bank lobbyists have been holding monthly conference calls and meeting in person every three months, they haven’t yet taken the step of forming their own trade group and haven’t opposed the agenda of the big banks. They remain members of the American Bankers Association, which counts all the large institutions among its ranks.

The regional banks aren’t part of the Independent Community Bankers of America, which on its website claims nearly 5,000 members with assets between $3 million and $17 billion.

Wayne Abernathy, executive vice president of the ABA, said his association has tried to show the regional banks that it can continue to represent their interests in Washington.

“It keeps us on our toes, to make sure as a trade association that we meet the needs of all our members,” Abernathy said.

Bloomberg News

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