How do the revised rules in the Bipartisan Budget Act of 2015 affect you and your business?
Banks could have an option to hold on to more of their capital for a longer period of time if a bill sponsored by Colorado Rep. Ed Perlmutter proves successful.
House Resolution 1356, which is supported by House members on both sides of the aisle, would provide banks with amortization authority for purposes of capital calculation. Under the bill, an insured depository institution with assets of less than $10 billion could choose to amortize any loss or write-down with respect to a commercial real estate loan or other real estate owned.
The amortization would have to occur on a quarterly straight-line basis over a seven-year period, beginning with the month in which the loss or write-down occurs, according to the text of the bill.
The proposed legislation would temporarily allow community banks to spread out a portion of their commercial real estate loans, enabling these banks to make more liquid capital available to make more responsible loans.
Loans made during a three-year period beginning on the date of enactment of the act would be eligible for extended amortization.
Banks with more than $10 billion in assets would still be subject to current rules, which require that real estate loan losses must be written down all at once.
The bill is also known as the Capital Access for Main Street Act of 2011.
Perlmutter, a Democrat who represents the Seventh Congressional District in the Denver metro area, initially introduced CAMS in 2010, but the bill never made it out of the Senate. With support from fellow Colorado Reps. Mike Coffman, Scott Tipton and Cory Gardner, all Republicans, Perlmutter reintroduced the bill, which is currently in the House Committee on Financial Services.
“When I ran for Congress, I promised to do everything in my power to help small businesses create jobs, and this bill accomplishes that goal by improving small business access to capital through community banks,” said Gardner of the Fourth District, which encompasses both Larimer and Weld counties.
CAMS would make it possible for banks to continue to provide credit to small businesses, according to Perlmutter. He said he wants to apply the same reasoning used during the 1980s to deal with the strain on banks from hardship in the agriculture industry. CAMS would enable banks to provide more small business loans, helping entrepreneurs to get their businesses off the ground, creating jobs and tax revenue.
The bill would give banks and regulators another lending tool, Perlmutter said, adding that members of the banking community are supportive of the legislation.
Bob Hinderaker, CEO of Signature Bank in Windsor, voiced his support for CAMS, calling the bill “very effective.” He said that the benefits of it would be to help banks manage their capital. Hinderaker also agreed that it is similar to the measures taken in the 1980s to relieve pressure on community banks.
Hinderaker said that he expects the bill, if passed, to help bring capital back to Main Street banks and make it easier for them to attract businesses looking for loans.
Both Hinderaker and Perlmutter, however, are concerned that regulators may put up enough resistance to keep the bill from passing once again. The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency would rather the banks take loan losses all at once and put their efforts into finding new capital.
“Regulators are forgetting that small banks and small businesses didn’t create this recession,” Perlmutter said.
“We’re lucky to have the support we do from our (Colorado) representatives,” Hinderaker said, but added that something needs to be done to address the influence large banks have on Congress as a whole.
Smaller banks have had a harder time dealing with the struggles posed by the economic downturn, and supporters of CAMS think it could be a step toward getting these banks back on their feet.
“Community banks need the tools to continue serving our business needs,” Gardner said “I believe this legislation will give them the ability survive and thrive without costing the taxpayer a dime.”
Perlmutter said that he hopes the bill will be up for a vote in the House in late summer or early fall.
Molly Armbrister covers the banking industry for the email@example.com.
Molly Armbrister covers the banking industry for theNorthern Colorado Business Report. She can be reached at 970-221-5400, ext. 209 or