A Federal Reserve governor who has been an important advocate for community banks announced she will step down. Elizabeth Duke submitted her resignation on July 11 as a member of the Fed board, effective Aug. 31.
Duke, who has been a member of the board since August 2008, has made no announcements about her future plans.
“Betsy has made invaluable contributions to the Federal Reserve and to the country during her five years at the board,” said Fed Chairman Ben Bernanke. “She brought fresh ideas grounded in her deep knowledge of the banking industry and the real-world dynamic between borrowers and lenders. I wish her the best in her future endeavors.”
Duke, 60, was appointed to the board by President George W. Bush to fill an unexpired term that ended in January 2012. During her time on the board, she served as chairman of both the Committee on Consumer and Community Affairs and the Subcommittee on Supervision and Regulation of Community and Small Regional Banking Organizations.
Before joining the board, Duke was senior executive vice president and chief operating officer of TowneBank, a Virginia-based community bank. In her resignation letter to President Barack Obama, Duke said she was “especially gratified” to have brought her experiences as a community banker to bear as regulators worked to build out financial services reforms under the Dodd-Frank Act.
“The Federal Reserve has worked with other regulators to craft a regulatory framework that will ensure a resilient financial system while preserving the availability of responsible credit to the full spectrum of creditworthy borrowers,” Duke wrote. “And we have done so without resorting to a one-size-fits-all approach.”
Ensuring that community banks are not lumped in with larger institutions has been a key goal for Duke in recent months. Late last year, she called on regulators to institute a separate set of mortgage regulations for community institutions. She also directed Fed researchers to study community banks’ role in the mortgage market.
“If the effect of a regulation is to make a traditional banking service so complicated or expensive that significant numbers of community banks believe they can no longer offer that service, it should raise red flags and spur policymakers to reassess whether the potential benefits of the regulation outweigh the potential loss of community banks’ participation in that part of the market,” Duke said during a November 2012 speech before the Community Bankers Symposium in Chicago. “Unfortunately, my discussions with community bankers lead me to believe that we might be approaching that point with residential mortgage lending regulation.”
After the Consumer Financial Protection Bureau released final mortgage rules in January, Duke signaled that community bank advocacy efforts have been paying dividends.
“Regulatory overreaction to a crisis is always a risk. But this time, I think community bankers have been more successful than they realize in making the case against ‘one-size-fits-all’ regulation,” Duke said during a Feb. 5 speech at the University of Georgia’s Terry College of Business in Duluth, Ga. “I can’t remember a time when I have seen more regulatory proposals drafted that differentiate between banks based on size or complexity.”
Duke also worked to ensure that community bankers were heard as the Fed and other regulators crafted final rules implementing Basel III’s guidelines in the United States.
“After hearing these concerns, numerous changes have been made to the proposal to reduce its complexity and to minimize the potential burden that would be placed on smaller and community banking organizations,” Duke said when the final Basel III rules were unveiled on July 2.
The Independent Community Bankers of America (ICBA) responded to the resignation announcement by thanking Duke for her service and support for the community banking industry. In particular, the group hailed Duke for her efforts related to Basel III and regulations enacted under Dodd-Frank.
“Governor Duke has helped pursue accommodations in the Basel III regulatory capital rules that will help community banks continue serving their customers and communities. She also has emphasized the importance of community banks to the mortgage market and has expressed concerns with the impact on small issuers of debit-card interchange fee standards,” the trade group said in a statement. “ICBA once again congratulates Governor Duke on her Federal Reserve Board service and wishes her well in her future endeavors.”
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