January 13, 2017

Community bank: We want less regulation

Cover story in the January 13, 2017 print edition of the Washington Business Journal, “Dear President Trump: We asked seven local businesses what they want to see from the new administration.”  Here is my response on community banking…

Community bank: We want less regulation

EagleBank CEO Ron Paul wants — and hopes for — the incoming administration of Donald Trump to overhaul banking regulations to be less burdensome on smaller community banks. Based on Trump’s pledges, Paul has good reason to be optimistic.

Specifically, Paul thinks one of the biggest issues facing community banks are regulations that increase costs based on the size of the bank.

“Once you cross the $10 billion threshold, it gets very, very expensive,” Paul said. “Small banks and regional banks and national banks are in different buckets and should be evaluated differently.”

He said that in many cases, a bank at $9 billion in assets would be just as profitable as a bank with $13 billion in assets because of the cost of additional regulations and reporting requirements that kick in at $10 billion. What that means, he said: Some banks might choose not to grow above that marker.

Paul has reason to pay particular attention to the issue, himself.

“EagleBank is getting close to that threshold number,” he said. “For us, the corporate strategy changes dramatically if that threshold goes away.”

He said he is encouraged by the incoming administration’s focus on banking regulations and the burdens on community banks put in place by the Dodd-Frank financial reform legislation passed by Congress in 2010.

Paul also wants the incoming administration to remove the penalties for community banks to take “reciprocal deposits,” which occur because customers with large deposits — let’s say $750,000 — are only insured by the Federal Deposit Insurance Corp. for up to $250,000 at any one bank. Banks often accept the full deposit and then deposit the excess at cooperating banks within the FDIC-insured amount. Those banks deposit reciprocal amounts with the original bank.

“The definition is improper and incorrect,” Paul said. “It’s our hope that the administration and the new heads of different FDIC and Federal Reserve will be evaluating that.” — Andy Medici