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According to a report in the Atlanta Journal-Constitution dated July 10, 2010, the community bank sector emerged victorious from legislative battles. These local banks, which account for the highest percentage of bank failures in the nation, won key concessions in the financial overhaul package now working its way through Congress. These concessions are crucial, as more than 90% of the nation’s banks have less than $1 billion in assets. Following is a summary of the concessions that community banks have won in this battle over banking reforms:

Higher Payments to the FDIC

According to the new bill, the Federal Deposit Insurance Corporation (FDIC) is allowed to raise the premiums it charges banks to guarantee accounts up to $250,000. This measure was proposed to help the FDIC recuperate from the $56 billion it has had to pay out due to the crisis in several banking sectors and the failures of several banks. However, these premium changes will not take effect for banks with less than $10 billion in assets until 2020. This limit also applies to any banks which are being overseen by the Consumer Financial Protection Bureau, now being created under the new reforms.

Trust Preferred Securities

The new reforms also allow banks with less than $15 billion in assets to continue counting trust preferred securities as part of their capital reserves. On the other hand, larger banks with more than $15 billion in assets will not be able to count these types of securities in reserve after five years. These securities remain controversial, as over $150 billion of them were issued by banks, who then defaulted on them after the financial crisis of 2008. This meant that banks that purchased these securities were left with nothing but debt – after already counting them as capital assets.

Source: jenngerl