House Republicans Urge Rescission of Four Banking Guidance Documents
House Republicans urged federal banking regulators to rescind agency guidance documents on (i) leveraged lending, (ii) model risk management, (iii) venture funding, and (iv) third-party risk management.
In a letter to Federal Reserve Vice Chair Michelle Bowman, Comptroller Jonathan Gould, and FDIC Acting Chair Travis Hill, House Financial Services Chair French Hill, et al. argued that (i) the 2013 leveraged lending guidance unnecessarily restricted credit to corporate borrowers; (ii) the 2023 OCC Venture Funding Bulletin discouraged banks from providing venture loans to early-stage companies; (iii) the 2011 Supervisory Guidance on Model Risk Management has been applied far beyond its intended scope—requiring even "non-models" and low-risk processes to meet burdensome validation standards; and (iv) the 2023 Interagency Guidance on Third-Party Relationships is not appropriately tailored for community banks, creating a "chilling effect" on partnerships with Fintech firms.
The legislators argued that the targeted directives functioned as unlawful regulations, pointing to President Trump’s Executive Order on repealing improperly issued rules and asserting that several directives were improperly issued outside the Congressional Review Act ("CRA") process and never submitted to Congress. They argued that agency examiners have treated the guidance as binding rules, leading to inconsistent supervision and significant compliance costs. They called for the immediate rescission of all four documents and stressed that any future guidance must be narrowly tailored, formally proposed, and fully compliant with the CRA. [Note: See additional CRA background materials.]