Pennsylvania Association of Community Bankers asked me to share a column in the July issue of Transactions. I discuss the importance of the American Dream, and why we must relieve the disproportionate regulatory burden placed on small businesses and community financial institutions. Please take some time to read the article below.

Best,
Louis

On June 8, the Federal Reserve released its interpretations of Basel III, choosing to implement rules and regulations dangerous to the entire banking industry, and especially harmful to community-based financial institutions.

In his Forbes article “Why Is The Fed Hitting Community Banks With ‘Too Big To Fail’ Capital Standards?,” Frank Sorrentino, Chairman and CEO of North Jersey Community Bank, points out there is cause for alarm with the “one size fits all” approach being adopted by the Fed. It will not only place unnecessary burdens on community-based institutions, it will cause further harm to Main Street by making access to credit more difficult for the small businesses that create 65% of our nation’s net new jobs.

I agree with Frank that regulators and policy makers must recognize the difference between “Too Big to Fail” banks and the local community institutions that disproportionately fund small businesses. Frank notes:

In the current environment where smaller institutions are disadvantaged in the capital markets, this new burden may be too much to handle. While all the nuances of the Federal Reserve’s report are being digested, the immediate effect will be for all banks to evaluate compliance with these capital standards and may actually lead some to decide that they need to slow their growth. This would not be good in our current state of the economy.

As I explain in Saving the American Dream,  the road to economic recovery begins and ends with Main Street America.  Policy makers need to aid economic growth by supporting our community financial institutions, not stifling them.

I encourage you to o read Frank’s article, which can be found here.

Best,
Louis

My congratulations to Jeff Gerhart, a fourth-generation banker who is chairman of Bank of Newman Grove in Nebraska, and was recently named chairman of the Independent Community Bankers of America. In an interview with American Banker, Gerhart took some time to explain his thoughts on the banking industry and the role of ICBA.

It is great Gerhart sees reducing regulatory burdens for community bankers as a top priority, and he understands the important role community banks play within their local communities. What is particularly interesting is Gerhart’s answer to what motivates him to be a banker:

“It’s the chance to keep a local businesses open in town, and we’ll work with pretty near anybody to make sure it works. If we weren’t there, I don’t know whether those loans would be made. We’re making loans that the big banks probably wouldn’t take a look at out here.”

This is exactly why we are working to save the American Dream. Without our community-based financial institutions, our economy and the nation as a whole will continue to suffer, as Main Street America will be crippled and unable to maintain its role as the job creator, innovator and economic driver of the country.

You can read the entire Q&A between American Banker and Gerhart here.

I had the pleasure of discussing the future of the banking industry with American Banker contributor and Bank Technology News Editor in Chief Penny Crosman. We talked about the need to save the American Dream, and how it begins with easing burdensome regulations on community banks. As I state in the article, the basic business model of banking is under pressure, and if policies are not put in place that allow community banks to raise the necessary capital to lend to small businesses and continue to serve the basic banking needs of their communities, economic stability will not become a reality.

The banking industry is in need of innovation, and not only from outside developers but the leaders of our own community. Staying innovative is a full-time job.  We must shatter the limitations that have left us ill-equipped to compete in the new world to fulfill our role as trusted financial intermediaries.

The article ran in the April 27 version of Bank Technology News, as well as the April 30 publication of American Banker, where I was featured on the cover of the newspaper. You can read the article here.

Best,
Louis Hernandez, Jr.

Ohio Gov. John Kasich has proposed a tax incentive to help community banks support small businesses.  More needs to be done across the country to aid the small business job creators and the community-based institutions that fund them. Kasich has the support of local banks, and is seeking to level the playing field between community banks and their larger counterparts.  Helping banks grow capital and increase lending is the exact formula needed for economic recovery. This type of fair regulatory reform is needed from our federal government to allow for Main Street America, the backbone of the U.S., to drive the economy forward.