This week nearly 700 local bank administrators and owners are gathering on Capitol Hill this week to meet with their members of Congress and advocate for legislation that affects them. The event, which began March 12 and runs through March 14, is a part of the Independent Community Bankers of America (ICBA) Washington Policy Summit, an annual meeting that provides community bankers an avenue for addressing their top concerns and grievances.
There are more than 8,500 community banks across America, but while the country watched intently last week to learn the fate of several large banks that failed the White House’s viability stress test, few people understand how the crisis is affecting banks locally. This week, the ICBA hopes that people will understand that the health of a community bank is a barometer for how well a community is doing as a whole. Although their banks may be small, their deposits are not; with 5,000 member institutions, ICBA banks hold $1 trillion in assets, $800 billion in deposits, and $700 billion in loans to consumers.
“The people who have the one-on-one relationships on main street are the community banks,” says Michael Grant, president of the National Bankers Association, which represents minority and women-owned financial institutions. “It is the vehicle that keeps America’s economy going.”
Grant says that the community banks “epitomized soundness and safety” through the economic crisis and continued to grant home, small business, and auto loans while national banks crumbled.
Members meeting at the Grand Hyatt in Washington, D.C., for the ICBA Summit are calling for congress to downsize large banks, saying that they pose a greater systemic risk to the economic stability of the country. They also believe that the larger banks are not pulling their weight and that they should pay a “systemic-risk premium” to the Deposit Insurance Fund.
One of the top issues that bankers want resolved involves an additional 20 cent special assessment that the Federal Deposit Insurance Corporation (FDIC) plans to impose on banks of all sizes to help recapitalize the fund that insures customers deposits. Members of the ICBA want congress to pass legislation to reduce the amount of the special assessment because it would cause a hardship for smaller banks.
“If the assessment is instituted then banks will have less capital and in turn, less money to lend within their communities, which will make it harder for the country to recover [from the economic crisis],” says Karen Tyson, senior vice president of communications at the ICBA.
George Andrews, president of Capitol City Bank and Trust Company (No. 10 on the BE 2008 Banks list with $27.316 million in total assets) says that he would have to pay a high premium on his earnings when earnings in Georgia are depressed due to unemployment and a soured real estate market. “We don’t’ need to take the little capital that we are earning to put it towards fees for the deposit insurance fund,” says Andrews. “This [idea that some banks are] too big to manage, too big to fail is the root of the current economic crisis. Because the big banks have priority, our little banks are too small too save.”
At the summit Andrews says he has spoken with Georgia’s Republican senators Saxby Chambliss and Johnny Isakson and received positive feedback and hopes to talk to Democratic Congressmen John Lewis and David Scott as well.
In addition, ICBA wants congress to consider changing a rule associated with mark to market accounting and require tighter regulatory and capital requirements on “too-big-to-fail” institutions. If adopted the measures will allow banks to write down real estate losses over a period of five years and protect taxpayers from future bailouts.