Dear Congresswoman/man:
We write as an informal coalition of small- and mid-cap
companies to express our views and concerns regarding the regulatory approach
to recent banking failures and the resulting financial market turmoil. We
represent a wide variety of sectors employing tens of thousands of people in
different corners of the country. Companies such as ours benefit from a
diversified financial industry that includes community, midsize, and regional
banks, as well as firms that provide capital markets solutions tailored for our
business sizes and needs. It is essential that policymakers, when considering any
new regulation and legislation revising prudential requirements for financial
institutions, consider any impacts that could hinder access to credit, capital,
and financial services for small- and mid-cap companies.
Our businesses rely upon financial institutions to
further create jobs and grow the economy in urban and rural areas. Before the
collapse of Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank,
the rapidly rising interest rate environment had constricted credit for small-
and mid-cap companies. The collapse of those institutions has further
restricted credit for businesses across the nation as large banks have sharply pulled
back on lending.
Beyond traditional banking needs, access to capital
markets remains critical for growth in our markets. Financial firms offer
small- and mid-cap companies operational, financial advisory, and capital needs
through a diverse range of services. The increase in proposed and finalized
rulemakings from the Securities and Exchange Commission have created a sense of
uncertainty in the capital markets, possibly exacerbating an already
destabilized economy.
It should be highlighted that the collapse of SVB seems to
have been primarily a result of internal mismanagement and due to a failure of
existing regulation. SVB was well capitalized; their failure to hedge interest
rate risk to maximize profits ultimately led to their downfall. Nevertheless,
the Federal Reserve Board of Governors, in its April 28th postmortem
report on SVB, indicated an intent to revisit a suite of rules for midsize and
regional banks.[1]
Additional regulations on smaller banks will only reduce their viability, which
in turn will adversely affect the health of the local economics that they
serve.
As policymakers and regulators formulate responses to the
recent turmoil in the banking sector, we ask that you give due consideration to
the role that community, midsize, and regional banks and diversified capital
markets firms play in the deployment of capital and services to companies like
ours. We stand ready to serve as a resource to you and your colleagues.