Remarks by
Donald E. Powell Chairman,
Before ICBA National Convention
San Antonio, Texas
March 12, 2005
FOR IMMEDIATE RELEASE Media Contact:
PR-24-2005 (3-14-2005) David Barr (202) 898-6992
It is always a great pleasure for me to be among my friends in the ICBA. As a former
community banker, I know what special people are here in this room and what important
roles you play in the economic life of our nation.
In the banking business, times are surely good. Our industry is riding a wave of
unprecedented success. The FDIC just released the year-end 2004 numbers for the
industry last week, which showed that insured institutions earned $123 billion last year,
a new record. And this was the fourth consecutive year of record earnings for the
industry.
The number of problem institutions – those with the poorest supervisory ratings – is
extremely low by historical standards. Only 80 insured institutions out of almost 9,000
are currently on the problem list.
In 2004, the banking industry achieved three milestones that are truly revealing:
• total assets of insured institutions surpassed $10 trillion;
• the industry's equity capital exceeded the $1 trillion mark;
• and the average size of an FDIC-insured institution climbed above $1 billion.
Times are good, indeed.
So what is there for bankers – and, particularly, community bankers – to be concerned
about?
Let me start with regulatory burden, which is a concern for all banks, but particularly for
community banks given the disproportionate impact on smaller institutions.
I'll mention two important efforts in progress to reduce regulatory burden, both of which
deserve your attention and involvement. The first is a legislative effort we call
"EGRPRA," which is an interagency project led by the FDIC's Vice Chairman, John
Reich. I can tell you that the banking industry has no better advocate in the regulatory
community on this issue than John. He is absolutely committed to working with the other
banking agencies to reduce unnecessary burden.
Donald E. Powell Chairman,
Before ICBA National Convention
San Antonio, Texas
March 12, 2005
FOR IMMEDIATE RELEASE Media Contact:
PR-24-2005 (3-14-2005) David Barr (202) 898-6992
It is always a great pleasure for me to be among my friends in the ICBA. As a former
community banker, I know what special people are here in this room and what important
roles you play in the economic life of our nation.
In the banking business, times are surely good. Our industry is riding a wave of
unprecedented success. The FDIC just released the year-end 2004 numbers for the
industry last week, which showed that insured institutions earned $123 billion last year,
a new record. And this was the fourth consecutive year of record earnings for the
industry.
The number of problem institutions – those with the poorest supervisory ratings – is
extremely low by historical standards. Only 80 insured institutions out of almost 9,000
are currently on the problem list.
In 2004, the banking industry achieved three milestones that are truly revealing:
• total assets of insured institutions surpassed $10 trillion;
• the industry's equity capital exceeded the $1 trillion mark;
• and the average size of an FDIC-insured institution climbed above $1 billion.
Times are good, indeed.
So what is there for bankers – and, particularly, community bankers – to be concerned
about?
Let me start with regulatory burden, which is a concern for all banks, but particularly for
community banks given the disproportionate impact on smaller institutions.
I'll mention two important efforts in progress to reduce regulatory burden, both of which
deserve your attention and involvement. The first is a legislative effort we call
"EGRPRA," which is an interagency project led by the FDIC's Vice Chairman, John
Reich. I can tell you that the banking industry has no better advocate in the regulatory
community on this issue than John. He is absolutely committed to working with the other
banking agencies to reduce unnecessary burden.
John and his team are working closely with the industry. The ICBA and other trade
groups have submitted a number of proposals, including several that would reduce
reporting requirements, streamline certain types of applications, and simplify Privacy Act
notices. We are generally supportive of your proposals, and now need your help to build
consensus among all the interested parties in order to solidify a final set of proposals
that John can present to the Congress.
I urge you to lend your support and your active participation to the EGRPRA effort.
The second area under regulatory burden that's getting a lot of our attention involves a
set of items that would not require legislation to fix. It's about the things we as regulators
can do today. Here let me focus on CRA. In the past two weeks, the Federal Reserve,
OCC and FDIC agreed on a proposal that would reduce the burden of CRA compliance
on community banks without diluting in any way the public policy objectives of CRA.
You heard me mention a moment ago that the average size of an FDIC-insured
institution is now more than $1 billion dollars. The proposal would raise the small bank
threshold to $1 billion to eliminate CRA data collection and reporting of small business,
small farm and community development loans. It would also rationalize the performance
tests to allow for more flexibility in meeting CRA goals.
Let me be clear on one point about this: Our proposal does not exempt any banks from
complying with the requirements of CRA. Our hope and belief is that the result will be a
more cost-effective, less burdensome and more efficient CRA compliance process for
community banks. I urge you to take a close look at the proposal and let us know what
you think.
When I was in banking, we used to talk a lot about the importance of an independent
and otherwise effective loan review officer. That's still important. In today's regulatory
environment, however, it's clear that bankers need to be equally concerned about their
compliance officers. Look at the issues on the front burner today, like privacy, identity
theft and, of course, BSA.
This is the number one issue for many community bankers, which is as it should be
given the importance of the subject. The FDIC is fully committed to helping law
enforcement thwart the misuse of the financial system by criminals and terrorists.
Realistically, a permanent "full court press" on BSA issues is the only responsible policy
position the regulators can take given the threats at large in our world today. Bankers
need to accept that, and adopt and embrace such an attitude themselves.
The devil, of course, is in the details. Bankers have raised many practical concerns and
issues about BSA related to uniform supervisory procedures across agencies, defensive
filing of SARS, CTR filing requirements, and so forth.
groups have submitted a number of proposals, including several that would reduce
reporting requirements, streamline certain types of applications, and simplify Privacy Act
notices. We are generally supportive of your proposals, and now need your help to build
consensus among all the interested parties in order to solidify a final set of proposals
that John can present to the Congress.
I urge you to lend your support and your active participation to the EGRPRA effort.
The second area under regulatory burden that's getting a lot of our attention involves a
set of items that would not require legislation to fix. It's about the things we as regulators
can do today. Here let me focus on CRA. In the past two weeks, the Federal Reserve,
OCC and FDIC agreed on a proposal that would reduce the burden of CRA compliance
on community banks without diluting in any way the public policy objectives of CRA.
You heard me mention a moment ago that the average size of an FDIC-insured
institution is now more than $1 billion dollars. The proposal would raise the small bank
threshold to $1 billion to eliminate CRA data collection and reporting of small business,
small farm and community development loans. It would also rationalize the performance
tests to allow for more flexibility in meeting CRA goals.
Let me be clear on one point about this: Our proposal does not exempt any banks from
complying with the requirements of CRA. Our hope and belief is that the result will be a
more cost-effective, less burdensome and more efficient CRA compliance process for
community banks. I urge you to take a close look at the proposal and let us know what
you think.
When I was in banking, we used to talk a lot about the importance of an independent
and otherwise effective loan review officer. That's still important. In today's regulatory
environment, however, it's clear that bankers need to be equally concerned about their
compliance officers. Look at the issues on the front burner today, like privacy, identity
theft and, of course, BSA.
This is the number one issue for many community bankers, which is as it should be
given the importance of the subject. The FDIC is fully committed to helping law
enforcement thwart the misuse of the financial system by criminals and terrorists.
Realistically, a permanent "full court press" on BSA issues is the only responsible policy
position the regulators can take given the threats at large in our world today. Bankers
need to accept that, and adopt and embrace such an attitude themselves.
The devil, of course, is in the details. Bankers have raised many practical concerns and
issues about BSA related to uniform supervisory procedures across agencies, defensive
filing of SARS, CTR filing requirements, and so forth.