ABA To SEC: Muni Advisor Plan Hurts Our Communities

In a letter signed by 614 bankers, the American Bankers Association is urging SEC chair Mary Schapiro to revise the SEC proposal that would require the registration of thousands of bankers and their banks as municipal advisors if they offer "the same traditional services that banks have provided to towns and cities for decades."  The bankers say the plan would interfere with banks’ long-time close cooperation in the work of local municipal governments, municipal hospitals, housing authorities and school districts, among others. 

As proposed, the SEC rule would label as “municipal advisors” any banks or bank employees who provide essential and traditional bank services to local municipalities, including day-to-day deposit, cash management, trustee and lending services.  The result would be major new compliance costs and additional, redundant layers of multiple rules by the SEC and the Municipal Securities Rulemaking Board (MSRB) for the very same products and services for which banks are already comprehensively supervised by prudential banking regulators, the ABA asserts.
   
ABA Executive Vice President Wayne Abernathy says the impact on local municipalities could be seriously adverse at a time when nearly every local government is struggling to deal with reduced revenues.
 
“This heavy new regulatory quilt, on top of the thick supervisory blanket that bank regulators have long applied to bank municipal services would make it much tougher for a bank to offer routine deposit products and cash management assistance to a municipality that it may have worked with for 50 years,” Abernathy said. “It’s hard to overestimate the hardship this one provision could cause for cities, towns, school districts and public hospitals across the U.S.”
 
The ABA letter renews its recommendation that the SEC rule state clearly that banks and bankers providing traditional banking products and services not be required to add one more, redundant layer of regulation and register as municipal advisors.