As Part of His #EmployMT Plan, Tester Introduces Bipartisan Legislation to Cut Red Tape for Main Street

Senator's Bills Will Strengthen Community Banks, Reduce Government Regulation

(U.S. Senate) – U.S. Senator Jon Tester today announced, as part of his #EmployMT plan, the introduction of bipartisan legislation to give community and mid-sized banks more flexibility to meet the needs of Main Street businesses and working families.

The Senator’s Main Street Regulatory Fairness Act would raise the stress testing threshold from $10 billion to $50 billion in consolidated assets, reducing the regulatory burden on 72 small and mid-size banks across the nation. Current law requires two forms of stress testing to ensure that financial institutions can weather tough economic times: testing done by federal regulators and testing done by the bank.

Testing done by community and mid-sized banks can add significant and unnecessary regulatory costs, money that could otherwise be used to give loans to small businesses. And unlike large Wall Street operations that have dedicated full-time staff to handle these stress tests, Main Street banks will have to hire outside firms to create complex economic models to run these tests.

The Main Street Regulatory Fairness Act recognizes that community and mid-size banks should not be subject to the same regulations as the largest financial institutions and increases the asset threshold for internal testing.

“Community and mid-sized banks did not cause the last financial crisis and they shouldn’t have to pay for it with expensive and burdensome regulations that cost jobs,” said Tester, a member of the Senate Banking Committee. “This bill cuts red tape and makes it easier for Main Street lenders to invest in entrepreneurs, families buying their first home, and parents sending their kids to college.”

The Main Street Regulatory Fairness Act cosponsored by Senator Jerry Moran (R-Kan.) also leaves in place existing inter-agency guidance, allowing financial regulators to stress test banks over $10 billion, should they deem it necessary. This will ensure that consumers are protected in the case of an economic downturn.

“The federal government should be encouraging, not stifling, job creation,” said Moran. “Small businesses need access to capital that community and mid-sized banks provide. This legislation will eliminate unnecessary regulations that inhibit local lenders from providing the credit necessary for Kansans and Americans to help grow the economy through small business job creation and homeownership.”

Tester and Moran have also introduced the bipartisan CLEAR Relief Act, which would eliminate outdated or unnecessary government regulations that can slow down or even stop small financial institutions from extending loans to Americans who want to buy homes or start small businesses.

The CLEAR Relief Act would specifically exempt community banks with assets of less than $1 billion from additional federal audit mandates; exempt from any escrow requirements any first lien mortgage held by a lender with less than $10 billion in assets; provide “qualified mortgage” status under the Consumer Financial Protection Bureau’s ability-to-repay rules for any mortgage originated and held in portfolio for at least three years by a lender with less than $10 billion in assets; exempting small banks from having to comply with the Volcker Rule; and allow a creditor to extend a second offer of credit without the current three-day waiting period provided the second offer is at a lower rate for the borrower.

“Montana families, ranchers and farmers, businesses and communities have been by challenged by stacks of unnecessary paperwork, costly delays and burdensome regulations associated with over-reaching regulations put in place after the 2008 financial crisis,” said Steve Turkiewicz, Chief Executive Officer of the Montana Bankers Association. “The bipartisan legislation authored and introduced by U.S. Senator Jon Tester addresses many of these barriers to job and economic growth in Montana, and throughout America, in a direct and courageous manner. Important improvements called for by the CLEAR Relief Act and the Main Street Regulatory Fairness Act will help Montanans gain access to the loans and financial services they need in order to thrive. Quick action by both the House and the Senate to pass this legislation into law promises to help reinvigorate our rural economy and reduce the unintended consequences of past regulations that have held back Montana businesses, ranchers and farmers, families and communities.”

“We applaud Senators Tester and Moran for moving to reform this unnecessary stress testing requirement,” said James Ballentine, Executive Vice President of the American Bankers Association. “The Dodd-Frank Act, without real analysis, inserted artificial asset thresholds within the regulatory system. The approach taken in the proposal both removes stress testing for some institutions and grants more flexibility to regulators to determine when a company-run stress test is needed for other institutions. The Tester/Moran bill is a critical first step to reforming this process.”

“The CLEAR Relief Act would help community banks meet the needs of their customers and promote local economic growth by providing common-sense relief from many crushing regulatory burdens,” said Independent Community Bankers of America (ICBA) President and CEO Camden R. Fine. “ICBA thanks Sens. Moran and Tester and strongly urges Congress to advance this bipartisan legislation to enhance economic and job growth in local communities.”