John Ryan gave voice Friday to a fear shared by many in the community banking industry.
"[T]he push is quietly on again in Washington to reform our regulatory structure to better reflect the business models of our largest banks," the CEO of the Conference of State Bank Supervisors said in a speech in Chicago.
"We fight a constant undercurrent of those who would like to see a single financial regulator and an industry of just a handful of banks."
Attend any meeting of community bankers and you'll hear Ryan's concern echoed typically a lot more bluntly. Plenty of community bankers are convinced that Washington policymakers want to run them out of business.
Ryan doesn't go that far, but he does say federal regulators are obsessed with oversight of the largest banks at the expense of community banks.
"If we gave half the time, brainpower, and high-level attention to an appropriate regulatory model for community banks as we have to the Basel capital framework, I think we'd have better solutions," he said at a conference hosted by the Federal Reserve Bank of Chicago.
"I believe we must rethink our system of supervision. I challenge us regulators to ensure that regulation is not the reason that a $35 million bank sells or self-liquidates. If we find we can't differentiate between business models, if we must accept centralized, complex and intrusive regulation as necessary for all to respond to the risks posed by the largest banks, then I believe we need to go back to the drawing board. We need large financial institutions, but not so large and so complex that our efforts to regulate them come at the expense of our diverse industry and our American system."
In an interview before he spoke, Ryan said his members the banking commissioners in each state are worried that fewer community banks will translate into less economic growth.
"It's a real frustration and a fear that we may be restructuring, unintentionally, our banking system in a way that hurts their economies," Ryan said.
The U.S. economy needs local banks that know their markets and are able to make individualized credit decisions, Ryan said.
"The continuing trend of consolidation into a handful of megabanks is a risk to the health, strength, or stability of our financial system and our economy."
To critics who claim the country remains "overbanked," Ryan took a look at banking in Illinois. While Cook County has 142 banks with 1,600 branches, Putnam County, 115 miles southwest of Chicago, only has three banks with one branch each.
Ryan had some another interesting statistic.
"The average large bank is now 64 times the size of the average community bank, compared to 12 times larger in 1985."
In the interview, Ryan said the "core" of community banking is eroding. "I think we need to take that seriously and start making changes now. I don't think it's too late, but I think it's something we need to get started on now."
If federal regulators can't find a way to supervise the largest banks without smothering the smaller ones, then Ryan thinks we ought to reconsider whether our country needs large banks. But that's not his first choice.
"This is not an either-or situation," he said. "We've got to find a way to 'and.' "
Barbara A. Rehm is American Banker's Editor at Large.