Regulators target community banks

Community banks say Federal Deposit Insurance Corp. examiners routinely are downgrading banks in safety and soundness examinations, and using subjective and unofficial capital requirements to lower banks' CAMELS ratings, Legal Newsline reported.

CAMELS is an acronym for the criteria used: Capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk.

Chris Cole, senior regulatory counsel for the Independent Community Bankers of America, said, "We're hearing complaint after complaint" from commuity banks.

Cole spoke last week at the National Convention of Attorneys General convention in Washington.

Legal Newsline reported bankers say a CAMELS downgrade forces them to put more money into reserves, making them reluctant to make loans and increasing their FDIC premiums.

There is no official change in capital requirements, but Cole said examiners on their own are imposing a capital requirement of up to 10 percent.

Oklahoma Attorney General Drew Edmondson, a Democrat, said community banks appear to targeted unfairly because of the near-collapse of large banks.

Nebraska Attorney General Jon Bruning, a Republican, agrees.

"America won't come out of this recession if small businesses can't thrive.

They need that liquidity in the market," Bruning said, Legal Newsline reported.

Bruning is president of the National Association of Attorneys General and a possible U.S. Senate candidate in 2012.

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