Midsize banks that mostly let Wall Street and small firms speak for the industry during the debate over the Dodd-Frank Act have decided it’s time to carve out their own agenda in Washington.
Companies including U.S. Bancorp., SunTrust Banks Inc., PNC Financial Services Group Inc. and Regions Financial Corp. are opening their own lobbying shops and staffing them with seasoned Washington hands.
Regulators and lawmakers have begun to pay attention as the banks argue for changes in how they’re affected by Dodd-Frank rules, including the so-called Volcker ban on proprietary trading and procedures for unwinding failed banks.
Executives and lobbyists for regional banks say they should be treated differently by agencies implementing the new regulations, because they focus on traditional deposits and lending rather than the higher-risk activities of firms such as JPMorgan Chase & Co. and Goldman Sachs Group Inc.
“We are not Wall Street banks, but we face the same regulatory regime as a Wall Street bank,” said Mark Oesterle, a lobbyist for SunTrust who formerly served as an aide to Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.
Regional banks tend to have more than $50 billion in assets, mostly in commercial and retail loans rather than complex investment banking products. Their size is well short of a Wells Fargo & Co., which is 20 times larger with assets of more than $1 trillion. Most have a distinct geographical footprint, like Regions in the South. There are about a dozen such firms in the U.S. that have become active in Washington.
Atlanta-based SunTrust spent less than $5,000 on lobbying in 2011 and 2010, according to federal records. So far in 2012, the bank has reported spending $75,000.
Other banks are opening their checkbooks even wider. PNC, based in Pittsburgh – which acquired Raleigh-based RBC Bank this year – reported spending $570,000 in 2010, $1.53 million in 2011 and $750,000 so far this year, records show. Regions, of Birmingham, Ala., spent $540,000 in 2010, $1 million last year and $890,000 so far in 2012.
Cincinnati, Ohio-based Fifth Third Bancorp., which spent $145,000 in 2010 and $680,000 so far this year, hired Eric Rizzo, a former congressional aide and insurance industry lobbyist, to open a Washington office in June 2011.
“We needed to beef up, to have that day-to-day presence in Washington,” Tom Ruebel, the bank’s Columbus, Ohio-based director of government affairs. “It’s not just Dodd-Frank implementation but a long-term investment for us.”
Ruebel said in an interview that the bank is looking to 2013, when a new Congress might revisit parts of Dodd-Frank.
“If there are any decisions that different pieces of Dodd-Frank need a look, we want to be there,” he said.
Jaret Seiberg, a senior policy analyst with Washington Research Group, a unit of Guggenheim Securities, said the banks are in a separate class because they mobilize savings for productive use by turning retail deposits into commercial loans.
“There’s a vast difference between a $100 billion regional bank and JPMorgan,” Seiberg said. “Congress views the institutions differently. The regulators view them differently. So it makes all the sense in the world that they would want to be represented differently. They should have done it five years ago.”
While regional banks hired outside lobbyists in Washington before Dodd-Frank, none had their own offices with full-time representatives, except for Capital One Financial Corp., which is based in nearby McLean, Va.
Despite the new lobbying firepower, the regional banks have limited room for change when it comes to Dodd-Frank rules. The law specifies that institutions with more than $50 billion in assets are subject to the most stringent requirements, a threshold exceeded by most of the firms.
What the regional firms can do is ask regulators to account for differences among banks when they write the details.
CEOs of eight banks including – U.S. Bancorp, Fifth Third, PNC, Northern Trust Corp. and M&T Bank – met with Treasury Secretary Timothy Geithner and Deputy Secretary Neal Wolin in May. And 12 regional bank executives met in July with Federal Reserve officials, including Fed Governor Daniel Tarullo, in part to discuss the Volcker rule.
The regional banks said the Volcker proposal would require them to set up expensive compliance programs even though they don’t engage in the risky trading the rule prohibits.
“The proposal as written will cause each of our organizations to comply with many, if not all, of the same requirements applicable to the largest financial firms with substantial trading volume and covered fund investments,” PNC, U.S. Bancorp, Capital One, SunTrust, Fifth Third, BB&T, Regions and Cleveland-based KeyCorp wrote in a Feb. 3 letter to regulators.
The position drew support from six members of the Senate Banking Committee, including Sens. Mark Warner, a Democrat of Virginia, and Mike Crapo, a Republican of Idaho, who wrote to regulators on Feb. 16 that compliance costs “could cause some banks to exit certain types of activities that provide liquidity to their customers and are permitted by the Volcker Rule.”
Rep. Barney Frank, the Massachusetts Democrat and one of the architects of Dodd-Frank, said the regulators have the flexibility to reduce compliance costs on regional banks. “They are assuming the regulators are stupid or hostile, and I don’t think they are hostile,” Frank said.