Congressional recesses are a godsend.  But this one is particularly special.

 Having been on the forefront of the financial reform debate in Congress for the past sixteen months, this August has been a welcome reprieve from the many trips to our Nation’s Capital and hours spent on the phone with Texas Congressmen and staffers.  It is also gratifying to know that it is more difficult for Congress to do more harm when not in session.  But more important than that, the lull has provided time to step back and reflect on recent legislative events, retool for future sessions and reconnect with IBAT members all across Texas.

There is a recurring theme that I hear from community bankers when asked about their thoughts on the recently passed Dodd/Frank Act.  That is, they don’t know what they don’t know.  Most all can see both the immediate benefits and the detrimental impact the Act will have on non-interest income and expense.  Almost all gird for what they can already see…more and more government regulation and intrusion to serve their customers and communities in ways they are accustomed.  Perhaps most disconcerting of all, they question the relevance of their institution once an onslaught of new consumer rules are promulgated by an empowered oversight agency that is yet to be created.

The number one strategic issue facing community bank CEO’s today is compliance.  That has been supported in survey after survey IBAT has conducted over the past six years.  When asked what circumstances might likely lead to the sale of their bank, the price offered is always listed first.  Sadly, the cost and burden of compliance is number two.  Not competitive or capital pressures, but the cost and certainty of compliance today and the uncertainty of additional compliance tomorrow.

Community banks today already spend nearly twenty five cents on every dollar on compliance costs.  It is estimated that the industry will spend nearly 50 billion dollars in 2010 on such compliance.  Every dollar spent on compliance not only raises the cost of lending and services rendered to the very people such rules are designed to protect, but diverts precious capital that can be used for credit availability.  All the while government bureaucrats wonder why this economy is slow to recover.

I am not confused about what we must do if we are to sustain community banking as we know it today and to create an environment that will attract shareholders to invest more capital in existing institutions or new investors to charter community based financial institutions.  First and foremost we must bifurcate this industry to create by legislation different rules and regulations for bona fide community banks vis a vis the large non traditional institutions.  Second, we must engage and be uncompromising in communicating our concerns as new consumer rules are being created.  And finally, we must provide new tools and assistance to our member institutions that will help all cope and reduce the overall cost of compliance.

In other words, we must create certainty in this uncertain financial world; certainty that someone is available to help with real solutions so community bankers can continue doing what they do best…serving local communities by helping local folks realize their dreams rather than the uncertainty of acquiring more resources and generating more paperwork to serve the government.

This is our challenge.  The future of community banking is dependent upon our leadership and action.