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Subcommittee Traveling to Georgia to Review Impact of Bank Examination Practices


Washington, Aug 9 -

The Financial Institutions and Consumer Credit Subcommittee will meet in Newnan, Georgia next week to ask community bankers and regulators if overly stringent federal bank examination standards are impeding an economic recovery.

Complaints from small business owners and bankers that regulatory standards are being applied in ways that inhibit bank lending have become so common the problem has acquired a name:  “mixed messages.”  While officials in Washington urge banks to “lend more,” bank examiners in the field apply restrictive standards that make lending more difficult.

“With a struggling economy and high unemployment, small businesses and small town banks need some relief from the growing regulatory burdens that block the creation of new jobs,” said Financial Services Committee Chairman Spencer Bachus.  “We cannot allow regulatory micromanagement of community banks to stifle prudent lending.  Bank examiners must recognize the risks of over-regulation, and particularly avoid subjecting smaller financial institutions to undue regulatory burdens.”

Last month the House of Representatives passed a bill sponsored by Rep. Lynn Westmoreland to address the “mixed messages” problem.  The bill (H.R. 2056) requires the Inspector General of the Federal Deposit Insurance Corporation (FDIC) to review the impact of the agency’s practices and procedures on community banks and report back to Congress.

“I would like to thank Chairman Bachus and Subcommittee Chairman Capito for holding this hearing in Georgia’s Third District.  Georgia has been hit particularly hard by bank failures since the 2008 crash, and that has affected our ability to recover.  As more community banks close, available credit dries up in many smaller towns that depend on those banks to start small businesses, buy a home, or expand existing businesses.  Hopefully, this hearing can lead to answers to not only what’s behind these bank failures but also answers to how we can correct this in the future,” said Rep. Westmoreland. 

After a six-year period in which only 35 banks failed nationwide, the pace of bank failures increased dramatically in the past two years:  140 failed in 2009 and 157 in 2010.  Sixty-three institutions have failed thus far in 2011.  Many of these failures have been concentrated in certain states.  Since 2008, 10 states have had more than 10 bank failures.

Georgia is one of those 10 states.  Since 2008, there have been 67 bank failures in Georgia, with 16 occurring since January of this year.

The Financial Institutions and Consumer Credit Subcommittee has held two hearings this year on the “mixed messages” issue.

Rep. Shelley Moore Capito, the Subcommittee’s Chairman, said:  “I would like to thank Rep. Westmoreland for his leadership on the issue of bank examination practices.  He has been a tireless advocate for his constituents.  This field hearing will provide members of the Subcommittee the opportunity to better understand the development of bank examination standards and how they are implemented by agency staff.”

The field hearing will take place on Tuesday, August 16 at 9:00 a.m. at the Coweta County Performing Arts Center, 1523 Lower Fayetteville Road in Newnan.

The first panel of witnesses will be comprised of regulators from the FDIC, the Federal Reserve and the Office of the Comptroller of the Currency.

The second panel of witnesses will be:

Chuck Copeland, CEO, First National Bank of Griffin

Michael Rossetti, President, Ravin Homes

Jim Edwards, CEO, United Bank

Gary Fox, Former CEO, Bartow County Bank