Wednesday, September 21, 2011

ABA Testifies on Raising Shareholder Registration Threshold

The American Bankers Association testified today before the House Subcommittee on Capital Markets and Government Sponsored Enterprises, expressing strong support for legislative solutions that would increase the shareholder threshold for Securities and Exchange Commission registration and allow the SEC to provide much-needed regulatory relief for community banks.

During a hearing titled, “Legislative Proposals to Facilitate Small Business Capital Formation and Job Creation,” ABA Vice Chairman Matthew H. Williams testified on the significant costs and reporting requirements many banks face due to the outdated 500-shareholder threshold, a rule that has not been adjusted for more than 40 years. Williams is also chairman and president of Gothenburg State Bank in Gothenburg, Neb.

“We are grateful to Vice Chairman Schweikert and to Representatives Himes and Womack for introducing legislative solutions that would update the shareholder threshold for registration – up to as many as 2,000 shareholders, a level that ABA strongly supports,” Williams said. “Raising the 500 shareholder cap would eliminate costly reporting requirements that are unnecessary for small banks that are already highly regulated and have significant reporting requirements. It would increase access to capital and free up resources that could be better used making loans in the community.”

When the economy is weak, new sources of capital are scarce, a challenge exacerbated by bank regulators’ new requests for even greater levels of capital.
“Banks that are nearing the 500 shareholder threshold cannot access new capital from additional investors without registering as a public company and incurring significant compliance costs,” Williams said. “These regulatory requirements and costs eat into capital and limit banks’ ability to make loans in their communities.”
ABA has long advocated that the shareholder threshold be increased, a needed change that has taken on new urgency in today’s regulatory climate.

“Over the last several years, banks have faced increased regulatory costs and expect hundreds of new regulations from the Dodd-Frank Act,” Williams said. “These pressures are slowly but surely strangling traditional community banks, handicapping their ability to meet the credit needs of their communities. Increasing the shareholder limit would open up an avenue to bring capital into small community banks.”

For a copy of Williams’ full testimony, please click here.

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