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RESTORE REGULATORY BALANCE TO BANKING, IBAA URGES

 RESTORE REGULATORY BALANCE TO BANKING, IBAA URGES
 WASHINGTON, Aug. 4 /PRNewswire/ -- The Independent Bankers


Association of America (IBAA) urged Congress today to restore balance in banking regulation by reducing the regulatory burden.
 Testifying before a House Banking subcommittee, IBAA President Bob Hawkins, chairman of Southern Commercial Bank of St. Louis, encouraged Congress to support the administration's regulatory relief bill. The bill, H.R. 5539, has been introduced in the House by Rep. Doug Bereuter (R-Neb.).
 Hawkins noted that laws passed by Congress, such as FIRREA and the FDIC Improvement Act, have led to significantly tougher bank regulation and supervision, disrupting the balance between credit availability and safety and soundness. The result has been "a regulatory climate that has made bankers afraid to make sound loans, particularly commercial real estate loans," he testified.
 Hawkins cited three specific examples demonstrating the economic impact of congressional action:
 -- Loan classification procedures. Bank examiners classify loans in increasing order of severity. In the past, such loan classifications were made by examiners after allowing bankers an opportunity to explain their loan judgments.
 "This process is no longer followed," Hawkins noted. "Today, the loan discussion has been replaced by a loan lecture. A young, inexperienced examiner is second-guessing a banker with more than 25 years of experience. The result is that the borrower's credit is classified and that banker is much less willing to make a similar loan. This is how a credit crunch gains momentum."
 -- FDICIA Section 304 underwriting standards. Section 304, designed to end overly generous real estate lending, threatens to prevent sound lending vital to the economic recovery, Hawkins testified. It requires regulatory agencies to adopt uniform regulations for real estate loans, but they "have over-reacted by proposing highly restrictive loan-to-value criteria -- lending ratios that will hamstring real estate and agricultural lending," Hawkins said.
 "These regulations will have a particularly devastating effect on housing construction," he added. A second problem, he noted, is that the regulatory guidelines will not apply to banks' direct competitors in real estate finance, such as the Farm Credit System or GE Capital.
 -- Differing regulatory priorities. The first phase of a comprehensive regulatory burden survey commissioned by IBAA reveals Congress' influence on regulatory priorities among the banking agencies. "The survey information indicates that Congress can have a significant effect on the activities of field examiners," Hawkins noted.
 The regulatory burden survey shows that the Community Reinvestment Act is the most burdensome regulation for community banks, regardless of regulator. "This comes as no surprise because in 1989 Congress ordered that the results of CRA examinations be made public," Hawkins said. "The sent a signal to the regulators to 'get tough' in their CRA exams. Unfortunately, the pendulum has swung too far and community banks are suffering from 'CRA overkill.'"
 IBAA is the only national trade association that exclusively represents the interests of the nation's community banks.
 -0- 8/4/92
 /CONTACT: Steve Verdier, senior legislative counsel, Independent Bankers Association of America, 202-659-8111/ CO: Independent Bankers Association of America ST: District of Columbia IN: FIN SU: LEG EXE


MH -- DC005 -- 6542 08/04/92 10:04 EDT
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Date:Aug 4, 1992
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