March 24 – Trade groups representing banks and credit unions had mixed reactions to a joint report to Congress by member agencies of the Federal Financial Institutions Examination Council about their efforts to reduce regulatory burden. The mandatory review was conducted as part of the Economic Growth and Regulatory Paperwork Reduction Act by the Federal Reserve System Board, the Office of the Comptroller of the Currency and the FDIC, and in conjunction with the National Credit Union Administration.
In particular, the agencies noted, their review focused on the effect of regulations on smaller institutions, such as community banks and savings associations. The regulators published four requests for written comment in the Federal Register and hosted six public outreach meetings across the country. NCUA routinely conducts town-hall meetings, listening sessions and other outreach activities to hear and discuss stakeholders’ views. Altogether, the agencies received more than 250 comment letters from financial institutions, trade associations and consumer and community groups, as well as numerous comments obtained at the outreach meetings.
The report, released March 21, describes several joint actions planned or taken by the federal financial institutions regulators, including simplifying regulatory capital rules for community banks and savings associations; streamlining reports of condition and income; increasing the appraisal threshold for commercial real estate loans; and expanding the number of institutions eligible for less- frequent examination cycles.
The report also describes the individual actions taken by each agency to update its own rules, eliminate unnecessary requirements and streamline supervisory procedures.
“In some of these areas, the FFIEC agencies have already made the changes or are in the process of doing so,” wrote Federal Reserve Board Gov. Daniel K. Tarullo in a preface to the report. “In other areas the agencies expect to propose changes to our regulations in the near term to provide this relief.”
In a statement for the American Bankers Association, Wayne Abernathy, executive vice president of financial institutions policy and regulatory affairs, described the results as “clearly an improvement” over the review conducted 10 years ago. “We appreciate regulators’ extensive consultation with the banking industry to better understand the specific regulatory burdens that make it harder for banks to serve their customers and communities,” Abernathy said. “While many of the recommendations point to additional work before relief is realized, there have also been several tangible steps taken by the agencies.
“We’re grateful for the agencies’ ongoing efforts to streamline community bank call reports and their progress toward simplification of regulatory capital rules,” the statement continued. “The announcement also sets forth important simplifications in appraisal requirements. The agencies’ embrace of tailored regulation indicates that more can be done to ensure that regulations don’t constrain banks from meeting their customers’ needs.
“We cannot have a regulatory system that adds regulations every year and reviews them every decade,” Abernathy concluded. “Instead, reviewing and eliminating unnecessary regulations should be a continuous, ongoing effort by each banking agency. The agencies’ report lays the foundation for just such an approach.”
The FFIEC report was greeted with skepticism by the Independent Community Bankers of America, arguing in a statement by President and CEO Camden R. Fine that the federal banking agencies have failed to address the overregulation of community banks that is harming local communities. “The nation’s community banks strongly support targeted regulatory relief for community banks and their customers, but far more substantive relief is needed to promote lending and economic growth,” Fine said.
“Today’s report falls far short of making the substantial impact on regulatory burden that ICBA has advocated in several comment letters and meetings since this EGRPRA review launched nearly three years ago,” Fine continued. “Regulators have said at these meetings that if they don’t advance real and substantive relief under this EGRPRA review, then they will have failed. Today’s report clearly shows that they have.
“The EGRPRA mandate requires the agencies to thoroughly review each regulation and eliminate those that are outdated, unnecessary or unduly burdensome,” the ICBA’s statement added. “While today’s report rightfully proposes simpler capital rules and relief from appraisal requirements, much of the report simply recaps initiatives already required by Congress.”
A more muted reaction was voiced by Carrie Hunt, executive vice president of government affairs and general counsel for the National Association of Federal Credit Unions. “The total regulatory burden on credit unions is at an all-time high,” Hunt told CU Today. “While it is encouraging to see regulators admit that there are opportunities to address outdated and unnecessary regulations, these acknowledgements should be coupled with action.”