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Community banks seeking Dodd-Frank regulation refuge under charter changes

William Pierce, the CEO of the New Hampshire-based Monadnock Community Bank, decided to sell the bank rather than face the U.S. Office of the Comptroller of the Currency as its regulator.

Pierce sold the bank, along with its $82 million in assets and charter, to GFA Federal Credit Union in Massachusetts. The credit union is regulated by the National Credit Union Association rather than the OCC, according to The New York Times.

Leading up to the sale of the bank, the institution was ordered by the OCC to conduct an examination of how the institution collects payments on delinquent loans. As a result, the bank had to reallocate three of its total 18 employees in order to comply with the orders and sift through the bank’s mortgages.

“We’ve had two foreclosures in the last four years, and yet here we had to do it anyways because our regulator only knows how to deal with the behemoth banks,” Pierce said, The New York Times reports.

More of America’s savings and loan institutions are attempting to avoid regulation by the OCC, with some choosing to switch to state charters and others seeking to become credit unions.

James Gilkeson, a former regulator at the OCC, said that following a financial disaster, legislators attempt to consolidate oversight under one central agency and then banks begin to search for the most lenient regulator, according to The New York Times.

Many community banks are troubled that the OCC would seek to regulate their smaller institutions the same way that large banks are regulated.

“The OCC basically punishes the community banks as if we committed the sins of risky lending that the biggest banks did,” Pierce said, The New York Times reports.

Despite claims that the OCC places unfair regulations on smaller banks when big banks were the institutions to blame for the financial crisis, some individuals see the move to acquire new charters as a way to circumvent regulation.

“This looks like the banks are trying to avoid tough regulation by heading to the states,” Amit Seru, a business professor at the University of Chicago, said, according to The New York Times.

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