Oklahoma banking representatives see potential problems with bank

Journal Record, The (Oklahoma City), Jun 23, 2009 by Brian Brus

The direction of the nation's bank reform plan taking shape in Washington, D.C., looks less damaging for Oklahoma's financial industry than many originally feared, state Banking Commissioner Mick Thompson said Monday.

But Oklahoma Bankers Association President Roger Beverage said he still sees potential problems with a disproportionate amount of oversight and unnecessary overlap.

"Today's laws, rules and regulations, as they relate to traditional community banks, are already on the books and are working fairly well," Beverage said. "But at the end of the day, consumers have to understand this is going to change banking as you know it. ... It means more costly credit to consumers and fewer opportunities to borrow."

President Barack Obama last week unveiled his plan for regulatory reform that calls for consolidating bank oversight and the creation of a new Consumer Financial Protection Agency. His major proposals outlined in the Treasury Department document, Financial Regulatory Reform: A New Foundation, answer five problems outlined earlier by Treasury Secretary Timothy Geithner.

"The lead-in all says the right stuff, about addressing the 'shadow banking industry,' the unregulated brokers and originators. And those are good things," Beverage said. He cited as an example the requirement that an originator of a loan must retain a minimum interest in that financial product, the proverbial "skin in the game."

But the creation of new regulations to keep track of the big players largely at fault for causing a worldwide financial meltdown could unfairly burden smaller banks, Beverage said. Obama's proposal calls for the creation of a new Consumer Financial Protection Agency in order to protect consumers and investors from financial abuse. That agency would have broad rule-making and enforcement powers, and Beverage is concerned that community banks would be forced to help shoulder those costs.

"There is no earthly reason to create a new regulatory system to protect consumers' rights, which are already preserved under the existing system, for traditional, heavily regulated, community banks like the ones we have in Oklahoma," Beverage said. "You don't need a new bureaucracy that's going to be extremely costly."

Thompson is also not sure yet about the new Consumer Financial Protection Agency - "It's up in the air as far as how community banks will be affected," he said. Community banks are typically defined as those with less than $1 billion in assets, which puts almost all of Oklahoma's banks in the category.

"But overall, from what we've heard and seen in discussions, it doesn't look like it will affect community banks as much as we thought it might," Thompson said.

Thompson is more concerned with the structure of a separate financial services oversight council of regulators, which would be chaired by Geithner and comprised of heads of the Securities and Exchange Commission, the Federal Reserve, the Consumer Financial Protection Agency, the proposed National Bank Supervisor and several other related agencies.

The missing component? "There's no state representation," Thompson said.

"I've already talked with (Frank) Lucas' office and asked him that when Geithner appears before the oversight committee to address that issue, because we need a representative from the state on that council. If it has the power it looks like it's going to have, then we need to have representation."

The House Financial Services Committee and the Senate Banking Committee have different scheduling plans for their respective attempts to craft legislation to reform the nation's financial institution regulations. Health care reform has taken the lion's share of attention lately, and many expect a final banking plan to be postponed until this fall for the Senate, while the House pushes its own legislation through well before then.

"This is the broadest proposal, maybe in the history of the United States, in terms of financial oversight and regulation," Beverage said. "The sheer magnitude of it, to suggest that you can intelligently digest and analyze what it means and pass it through the process by the end of the year is absolutely ludicrous."