ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release July 13, 2004 #04-34
E-mail: [email protected]

ACB URGES REVISIONS TO GRAMM-LEACH-BLILEY ACT

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WASHINGTON, D.C. — America’s Community Bankers, which supported passage of the Gramm-Leach-Bliley Act of 1999, urged Congress today to revise some of the provisions that are creating an unnecessary burden on banks, particularly community banks.

Testifying before the Senate Banking Committee, Harry P. Doherty, a New York community banker who is also first vice chairman of ACB, cited benefits from the act’s flexibility for banks to affiliate with securities firms and insurance companies, positive changes to the Federal Home Loan Bank System, and revisions to the law governing the FDIC’s Savings Association Insurance Fund. Doherty is also vice chairman of Independence Community Bank Corp., Brooklyn, N.Y.

But he noted that the law reduced the choices available to financial organizations by restricting ownership of newly formed unitary savings and loan holding companies to financial firms. “That change. . .deprived the industry of an important source of capital, without any positive effect on the safety and soundness of the banking system,” Doherty said. Despite the restrictions, the unitary holding company remains an important choice for financial firms, he said.

Doherty said the GLBA has not always been implemented in ways to maximize the potential for bringing financial services to consumers efficiently. “Savings associations have yet to achieve regulatory parity with banks under the securities laws,” he said. “Savings associations should be given the same regulatory treatment as banks when they engage in the same securities activities as banks,” he added. “ACB believes that only a further statutory change can ensure parity for savings institutions.”

Doherty also said that the regulatory process established by GLBA to authorize new financial activities for banking organizations has not been allowed to work as intended. “As the result of a highly politicized campaign by the Realtor community, the Treasury and Federal Reserve have been unable to finalize a rulemaking allowing national banks and financial holding companies to offer real estate services.”

The GLBA made important and welcome changes in membership requirements, capital structure and regulation of the FHLBank System, Doherty said. It added stability to the system’s capital base by creating permanence of capital. Nine of the 12 FHLBanks have implemented new capital plans, but “proposals to require the FHLBanks to register certain securities with the Securities and Exchange Commission, without first establishing exemptions consistent with the cooperative structure of the system, could delay implementation of the remaining capital plans,” he said.

The GLBA eliminated the SAIF Special Reserve. “ACB urges the committee to act soon on pending deposit insurance reform legislation that will give the FDIC additional flexibility in managing FDIC’s insurance funds,” Doherty said.

The GLBA also created new privacy rights for consumers. “Some of these provisions created a significant regulatory burden for all depository institutions,” Doherty said. “Although compliance with these provisions can be costly for all depository institutions, compliance costs fall more heavily on community banks,” he said.

Doherty urged Congress to reduce the unnecessary regulatory burden by replacing the requirement for annual privacy notices for those banks with limited information sharing practices, such as community banks, with notices (after the initial notice) only when practices are modified.

“I am sure that you are all inundated by privacy statements each fall,” said Doherty. “I am equally confident that most or all of them remain unread.” He called on federal regulators to develop an easy-to-understand, short-form notice.

Click here to read the testimony

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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