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ABA Testifies on Unintended Consequences of Volcker Rule Print E-mail
Wednesday, 15 January 2014

WASHINGTON – The American Bankers Association (ABA) testified today before the House Financial Services Committee, offering the banking industry’s perspective on the unintended consequences of the Volcker Rule – particularly for our nation’s community banks.

Charles Funk, president and CEO of Midwest One Financial Group, testified on behalf of ABA.  Midwest One Financial Group is a $1.7 billion community bank headquartered in Iowa.

In his testimony, Funk thanked Chairman Hensarling, Ranking Member Waters, Subcommittee Chairman Capito and other members of the Committee for their recent engagement with regulators on the unnecessary and potentially significant losses on collateralized debt obligations secured primarily by trust-preferred securities.  He also thanked Chairman Hensarling and Chairman Capito for introducing H.R. 3819 – which ABA strongly supported – to provide relief for community banks that would have suffered considerable losses under the agencies’ rule.  
“Your many voices on the issue and sense of urgency to address unintended consequences helped move the process forward to find a satisfactory solution,” Funk said.  “This solution will help many community banks like mine and, more importantly, the customers and communities we serve.”

Funk also applauded the regulatory agencies for moving quickly to find a resolution to the problem.

 “This is a very good example of how the agencies should act when problems in a rulemaking arise,” Funk said.  “With such a complicated rulemaking like the implementation of the Volcker Rule – which totaled nearly 1,000 pages – inevitably there will be problems that were not anticipated.”

Funk noted that had regulators not acted, the immediate cost to his bank would have been over $1 million, and at least $600 million for the entire industry, with the impact on communities many multiples of that.  And while this particular issue appears to be resolved, concerns with the Volcker Rule remain.

This rule also results in a compliance burden for community banks, despite agency statements to the contrary,” Funk said.  “It is possible that community banks will need to put in place compliance programs to ensure they do not inadvertently violate the Volcker Rule.  These compliance programs are costly and time consuming, taking away valuable resources that could otherwise be used to serve local communities.”
Funk concluded his testimony by asking Congress to help ensure the Volcker Rule remains focused on its original intent.

“The Volcker Rule should not impair traditional banking services that allow banks to meet the needs of their customers, nor impose unnecessary costs on any bank, particularly regional and community banks, where no argument of systemic risk can be justified,” Funk said.  “Congress should be vigilant in assuring rules are focused on the original intent to reduce systemic risk and are not used to hinder the traditional business of banking: providing credit to customers.”

(Source - ABA News Release)


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