As part of the Independent Community Bankers of America’s (ICBA) war on regulatory burden, the association has sent a letter to Federal Reserve Chair Janet Yellen, Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg and Office of the Comptroller of the Currency (OCC) Thomas Curry. In the letter, ICBA expresses its deep and growing concern about the increasing regulatory burden surrounding the generation of quarterly call reports by community banks and the adverse impact of this burden on their ability to effectively serve their communities.
“Community banks have always been simple, straightforward, local lenders whose main purpose is to provide meaningful and impactful banking services that strengthen and grow their communities in both good times and bad,” Camden R. Fine, ICBA president and CEO, said in the letter. “The current call reporting framework, where the smallest community banks are required to provide extensive levels of financial information with the same specificity as the largest megabanks, represents a significant burden on call report preparers when quarterly reports do not provide meaningful financial information for regulators, depositors, shareholders, and other stakeholders.”
In order to reduce this call report burden for community banks, ICBA proposes that the banking regulators institute a more practical approach to community bank information reporting by instituting short-form call reporting in the first and third quarters for community banks that are considered to be well-capitalized. The full reports would be filed for the year-end and mid-year quarters.
In the letter, ICBA also notes that regulated credit unions are not required to produce anywhere near the level of detail that is required by community banks even though their depositors are offered the same levels of protection and they engage in similar and in some cases identical activities as community banks. For example, in the first quarter of 2014, the smallest community bank was required to submit a call report that is 80 pages in length while the largest credit union in the country with over $58 billion in assets submitted a call report with only 28 pages.
“One must question why a financial institution with total assets exceeding $50 billion, a key benchmark for determining when a bank is so large that it becomes systemically important, is required to provide considerably less metrics than a community bank that is a mere fraction in size,” Fine said.
ICBA’s letter to the regulators follows survey results released by the association and a petition launched by the association in the past few weeks to demonstrate to the regulators just how problematic and burdensome the reporting requirements are for the more than 6,500 community banks across the nation.
The call report has grown from 18 pages in 1986 to 29 pages in 2003 to nearly 80 pages of detailed financial reporting requirements today. According to the 2014 ICBA Community Bank Call Report Burden Survey, the annual cost of preparing the call report has increased for 86 percent of respondents over the past 10 years and the total hours dedicated to preparing the call report has increased for 73 percent in that time. Further, one in three said the number of employees involved in call report preparation has increased, with more than 60 percent saying they have at least two employees who prepare their report.