U.S. Sen. Roger Wicker (R-MS) helped author a bipartisan bill to provide regulatory relief to small community banks, specifically targeting rules that are meant to police larger financial institutions.
The legislation takes aim at the punitive treatment of trust preferred securities held by community banks.
Following the financial crisis, regulations handed down under Basel III capital rules began subjecting banks that hold trust preferred securities, which are taxed like debt but maintain characteristics of equities, to punitive treatment in 2015. The rules, which are being implemented over a four-year period, have negatively impacted approximately 30 community banks.
In response, Wicker and U.S. Sen. Tammy Duckworth (D-IL) introduced legislation that would provide regulatory relief to community banks, preventing them from having to merge with larger banks and ensuring that rural communities continue to have local banking options.
“Small community banks should not have to meet the same capital requirements meant for much larger institutions,” Wicker said. “Removing these hurdles would help to ensure that these smaller banks can invest in their communities and give Mississippians the opportunity to own their first home or start a small business.”
Basel III rules are expected to impact approximately $250 million in capital, and eliminating the provision would enable community banks to increase lending capacity by more than $2.5 billion.
“I’m glad to join Sen. Wicker in introducing targeted common sense relief for a small number of community banks from regulations that were intended for the largest international banks and those at the center of the 2008 financial crisis,” Duckworth said. “This bipartisan legislation will free up access to credit for Illinois small businesses, first time homebuyers and help affordable housing construction — all while keeping intact capital protections for the large banks that need them.”