By Ray Birch
WASHINGTON–While S 2155 has been hailed as a victory for credit unions by the trade groups, what about the bigger picture? How will the competitive landscape change as a result of legislation that also includes numerous breaks for the nation’s banks?
Experts indicated to CUToday.info they are split on the outcome for credit unions—some saying that banks simply received too much in comparison to CUs and now will be even tougher competitors, while others say the banks’ breaks are not game-changers.
Dennis Dollar is among those concerned about the strength of banks coming away from the Economic Growth, Regulatory Relief, and Consumer Protection Act.
“While any legislation that gives relief from the onerous and over-reaching provisions of Dodd-Frank is valuable, the reality is that banks got a lot more than credit unions from this bill—about eight to one in meaningful provisions,” said the former NCUA chairman who now heads Dollar Associates.
The biggest specific benefit to credit unions is the ability to consider non-owner-occupied dwellings with up to four units as residential, rather than business, loans, according to Dollar, a point on which he agrees with a number of credit union CEOs interviewed earlier by CUToday.info.
“This opens up about $4 billion in room under the MBL cap that can be used for small business lending, and it removes some of the additional requirements and restrictions that apply specifically to business loans from what are obviously loans intended for residential purposes,” said Dollar. “The changes in the RESPA provisions, HMDA reporting for smaller institutions and ability to consider some mortgages held in-house as qualified will have some spillover benefit to credit unions as well—even though these changes are primarily community bank driven.”
Working Together
Dennis Dollar
Dollar said the bill is a good example of what banks and credit unions can accomplish on Capitol Hill by working together, rather than being at odds.
“It would be nice if, in return for the support of the credit union industry, the banks might consider actually including a few more credit union-specific provisions in return for that valuable support,” he said.
For a close look at what the bill delivered to banks and credit unions, click here.
http://www.cutoday.info/Fresh-Today/Congress-Passes-Reg-Relief-Bill-Here-s-What-s-Included-for-CUs-Banks
Overall, Dollar termed the bill a “good solid base hit” for credit unions.
“And it is good that it passed, because it shows a willingness in Congress to give a second look at some of the most problematic parts of Dodd-Frank,” Dollar said. “Hopefully there will be more to come. But, while it is clearly a clean single to the outfield that deserves a cheer by credit unions in hopes that it starts a rally with more scoring to come, the bill would have to be scored an extra base hit for community banks, as they got many more provisions included than did credit unions.”
As CUToday.info has reported, the legislation includes an expansion of powers for community banks that could come back to bite the movement, sources have said.
http://www.cutoday.info/THE-news/As-CUs-Pop-Champagne-Over-Bill-Others-See-Bank-Lobbyists-Act
“This landmark law signed by the president … unravels many of the suffocating regulatory burdens our nation’s community banks face and puts community banks in a much better position to unleash their full economic potential to the benefit of their customers and communities,” ICBA President and CEO Rebeca Romero Rainey said in a statement.
Bill Burke
In Kettering, Ohio, Bill Burke, CEO of $386-million Day Air CU, is uneasy over the hand dealt big banks from S. 2155. The bill changes the definition of “too big too fail,” meaning the number of banks that must undergo the Fed’s most stringent regulatory review now number just 12.
“I’m somewhat concerned about the relief being provided to the lower tier of the too big to fail banks,” Burke said. “The threshold for annual stress tests and formal risk committee requirements was raised from $50 billion to $250 billion, providing a good amount of relief for many of our biggest competitors—Fifth Third Bank, Key Bank, and Huntington Bank. Politics is the art of compromise but easing up on the banks that caused or greatly contributed to the Great Recession is worrisome.”
CU Competition
But Bill Handel, Raddon VP of research and product development at Raddon, is not so sure the deal banks received from Washington will have a huge effect on credit union competition.
“There are provisions in this legislation that help banks and provisions that help credit unions,” said Handel. “Yes, there is probably more in this bill for banks, but I don’t think these breaks give banks a real competitive advantage.”
Handel emphasized that if some credit unions complain that S. 2155 hurts their shops due to bank competition, those are not well-run CUs.
“I don’t think what is in S 2155 is enough to all of a sudden change the competitive marketplace,” said Handel. “I just don’t see it that way.”
Bill Handel
What should be taken away from the bill, said Handel, who also views the non-owner-occupied dwellings rule as the largest break for the movement, is that S 2155 is a sound first step in Washington providing FIs with real regulatory relief.
“This is an incremental step,” said Handel. “If we can find a way to make our regulatory environment much more logical and cost effective for credit unions…There are some good steps taken here to move us away from the overbearing legislation put in place in the recent years. This bill is the beginning of the shifting of the pendulum that we have all hoped would happen.”
Like Handel, Tim Anderson, CEO of the Washington-based Government Printing Office FCU, appreciates where Washington appears to be heading with regulatory relief and does not fear what the banks received from S. 2155.