Federal Reserve Chairman Ben Bernanke told a group of executives from smaller banks Wednesday that the financial overhaul will level the playing field for them with the industry's giants.
Bernanke said it would be important for the banks to adapt to the changing regulatory environment, in remarks to the annual convention in San Diego of small- and medium-sized banks. Bernanke acknowledged their concerns about the new law. But he said most of the requirements are aimed the country's biggest banks and not them.
Congress passed the regulatory law last year in an effort to prevent a repeat of the 2008 financial crisis. Small-bank executives have complained that it will cost them a lot of money to meet the new rules, even though they were not responsible for causing the financial crisis.
Bernanke said that the hundreds of community banks, those with assets below $10 billion, would play a vital role in the nation's recovery because they are an important source of loans for small businesses.
"Although we are not yet where we would like to be, the good news is that many community banks have already been doing their part to meet the credit needs of their customers, notably including small business customers," Bernanke said in his speech to the Independent Community Bankers of America.
Bernanke said that it was fortunate that Congress had decided to preserve the Fed's regulatory connection to small banks. In one version of the measure, the Fed would have lost the power to regulate them. But the law maintains the Fed's powers and even broadened it to include thrift holding companies. The thrifts themselves will be regulated by the Office of the Comptroller of the Currency. Congress abolished the Office of Thrift Supervision, which was a weak regulator.
The Fed chairman said the broadened role for the central bank benefits everyone.
"We are delighted that, through our supervision, our gathering of economic intelligence and the activities of our community affairs departments, we will be able to remain fully engaged with grass-roots America," Bernanke said.
In response to an audience question, Bernanke said that the Fed understood that Congress wanted to shield smaller banking institutions from the impact of a new law that requires large banks to trim debit card fees. At stake is the $16 billion each year that, according to the Fed, stores must pay banks and other credit card issuers when customers use the cards.
The Fed, which must implement a rule to put the new law into effect, understands that banks with assets of less than $10 billion should be protected from losing the fees they now receive, Bernanke said.
"At the Federal Reserve, we are quite aware that the Congress in writing this law intended for smaller (card) issuers to be exempt, carved out from the broader statute," Bernanke said. "And in our rule-writing, we will do everything we can and use all the powers we have to try to make sure that that carve-out is effective."
Following Bernanke's speech, many bankers in attendance didn't sound very convinced.
Bridgette Hayes, a community banker From Texas, said, "He feels our pain, he knows our burden. We always feel like, 'Well, maybe you don't.'"
"I'm not sure enough has been done," said community banker Cliff McCauley.
Bernanke had previously told lawmakers that the exemption for smaller banks might not work. The concern on the part of the small banks is that merchants might refuse to accept their cards because they carry a higher fee. Bernanke has said that problems in dealing with all the complexities of the new law may mean that the Fed is not able to complete the rule to implement the law by an April 21 deadline.
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