ICBA Voices Strong Support for Vital Systemic-Risk Legislation Calls for Prefunded Resolution Process
The Independent Community Bankers of America (ICBA) today told Congress it supports critical systemic-risk legislation that was released earlier this week by the Obama administration and the House Financial Services Committee. ICBA commended House Financial Services Chairman Barney Frank (D-Mass.) and the Treasury for their substantial efforts to end too-big-to-fail.
Washington, D.C. (Vocus/PRWEB ) October 30, 2009 -- The Independent Community Bankers of America (ICBA) today told Congress it supports critical systemic-risk legislation that was released earlier this week by the Obama administration and the House Financial Services Committee. ICBA commended House Financial Services Chairman Barney Frank (D-Mass.) and the Treasury for their substantial efforts to end too-big-to-fail.
"Just one year ago, due to the failure of the nation's largest institutions to adequately manage their highly risky activities, key elements of the nation's financial system nearly collapsed," said R. Michael Menzies, ICBA chairman and president and CEO of Easton Bank and Trust Co., Easton, Md., in testimony before the House Financial Services Committee. "ICBA recommends that Congress move quickly to pass this vital systemic-risk legislation, which will ultimately protect our financial system, as well as our nation's more than 8,000 community banks and the customers and communities they proudly serve."
Menzies said ICBA strongly supports designating the Federal Reserve as the systemic-risk regulator and enhancing the Financial Services Oversight Council authority over the Fed's decisions. ICBA is pleased the legislation gives the Fed authority to require systemically risky holding companies to sell assets or terminate activities if they pose a threat to the companies' safety and soundness or the nation's financial stability. In addition, ICBA recommends that the legislation direct the Fed to study each identified financial holding company to determine if it should be subject to this new authority. "This authority gets to the heart of many of the problems that led to the nation's financial meltdown," said Menzies.
"Another important part of the solution to the too-big-to-fail problem is contained in the Bank Accountability and Risk Assessment Act (H.R. 2897) introduced by Rep. Gutierrez (D-Ill.)," said Menzies. "This bill would make the funding for the Deposit Insurance Fund more risk-based and equitable. ICBA urges the committee to incorporate this measure into broader financial regulatory reform."
Menzies also said ICBA recommends that the largest institutions prefund the resolution process for systemically risky holding companies, rather than after the fact. A prefunded resolution process has a number of advantages. It avoids an initial call on taxpayer funds and the pro-cyclical effects of a post-resolution assessment applied only to surviving firms.
ICBA appreciates the provisions to close the last loophole that would allow the mixture of banking and commerce. "ICBA strongly supports efforts to block the creation of additional industrial loan companies that may be owned by commercial firms," said Menzies. "Imagine the catastrophic effects we would have faced if the largest banks and the largest commercial firms had been combined."
ICBA looks forward to working with the Obama administration and Congress on this important legislation as it moves forward.
About ICBA
The Independent Community Bankers of America, the nation's voice for community banks, represents nearly 5,000 community banks of all sizes and charter types throughout the United States and is dedicated exclusively to representing the interests of the community banking industry and the communities and customers we serve. For more information, visit www.icba.org.
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