Bank Regulators Solicit Comment on Burdensome Requirements (Part 4)
Commentary by Thomas Delaney
The Federal Reserve, FDIC and OCC requested public comment on "outdated or otherwise unnecessary regulatory requirements on insured depository institutions and their holding companies."
The request for comment is the final of four notices by the banking agencies that address categories of regulations being reviewed under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 ("EGRPRA"). The EGRPRA requires banking agencies to review regulatory requirements for their supervised institutions every ten years. This fourth notice addresses: "Banking Operations, Capital, and the Community Reinvestment Act, and agency rules issued in final form."
The first notice was published on February 6, 2024, and covered regulations on Applications and Reporting; Powers and Activities; and International Operations. (See previous coverage.) The second notice was published on August 1, 2024, and covered regulations on Consumer Protection; Directors, Officers and Employees; and Money Laundering. (See previous coverage.) The third notice was published on December 11, 2024, and covered regulations on Rules of Procedure; Safety and Soundness; and Securities. (See previous coverage.)
The public comment period runs 90 days following publication of the comment request in the Federal Register.
Commentary
As the federal bank regulators move into the fourth and final phase of the EGRPRA mandated process to identify outdated or otherwise unnecessary regulatory requirements, banks, savings associations and other entities, such as industrial loan companies, will have an opportunity to comment on three categories of regulation: Banking Operations, Capital and the Community Reinvestment Act, each of which have been the focus of industry concern for the past several years.
In the case of capital requirements and CRA, the industry can take additional bites at regulatory apples that have been the focus of long simmering industry irritation. Industry opposition to the Federal Reserve's proposed Basel III endgame rule proposed last year, led the Fed to essentially withdraw its proposal for further consideration. The EGRPRA process will give the industry another opportunity to comment on leverage ratios, methods for risk weighting assets, stress-testing requirements and capital surcharges for large banks; all issues that go to the heart of Basel III.
On the CRA front, the agencies announced earlier this month that the final rule issued in October 2023 would be rescinded and the framework that was in place prior to the issuance of that rule would be restored. The recision of the 2023 CRA regulation was intended to reduce regulatory burden on banks, however, banks interested in merging have long chaffed at how, under the pre-2023 regime, community groups can use CRA data to delay and/or complicate merger approvals. The fact that rules have been withdrawn or rescinded does not mean that the industry will be without points to make when invited to comment on outdated or unnecessary regulatory requirements.
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The Federal Reserve, FDIC and OCC requested public comment on "outdated or otherwise unnecessary regulatory requirements on insured depository institutions and their holding companies."
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The OCC, FRB and FDIC requested comment on a set of rules as part of a process to identify "outdated" or "unnecessary" regulatory requirements on insured depository institutions and their holding companies.