FDIC Vice Chair Signals a Change in Agency Priorities
Commentary by Tim Byrne
FDIC Vice Chair Travis Hill outlined a vision for the agency's direction ahead of the change in administration. Mr. Hill, who is set to become acting FDIC Chair, emphasized the need to correct inefficiencies in bank supervision and to revise the agency's approach to innovation.
In his address, Mr. Hill highlighted the following:
- Supervision. Mr. Hill criticized the current supervisory approach, which he said prioritizes "process rather than core financial risks." He pointed to the failures of Silicon Valley Bank and other institutions in 2023 as evidence of misplaced regulatory emphasis, arguing that supervisors had focused on "a litany of process-related issues" that had little relevance to financial risks. He advocated for changes to the CAMELS rating system and examination manuals, urging supervisors to emphasize core safety and soundness risks rather than "crushing compliance costs."
- Innovation and Technology. Mr. Hill encouraged regulators to take a more open-minded stance on new technologies, including reducing approval barriers for banks experimenting with cutting-edge solutions. He also called for the revival of FDiTech, the FDIC's innovation lab, to promote collaboration with the private sector and develop better guidance for fintech partnerships, AI and digital assets.
- Debanking. Mr. Hill condemned "Operation Choke Point"-like practices that have led to the debanking of law-abiding individuals and businesses, particularly those associated with digital assets. He stressed that regulators must ensure access to banking services and reassess Bank Secrecy Act compliance frameworks to reduce unnecessary account closures.
- Climate Policy. Mr. Hill described the FDIC's focus on climate-related risks as "misguided." He stated that banks have effectively managed natural disasters for centuries and questioned the agency's involvement in international groups like the Network for Greening the Financial System.
- Capital Standards. On capital reforms, Mr. Hill expressed skepticism as to recent proposals under the Basel framework. He encouraged a more measured approach, highlighting the need for robust economic analysis and stakeholder feedback before adopting significant changes.
Commentary
The Vice Chair's remarks highlight priorities for the FDIC in the new presidential administration. To a great extent, these priorities are a continuation of those advocated by the FDIC Chair under the first Trump administration. The FDIC board can be expected to back these initiatives because two members of the FDIC board are the Comptroller of the Currency and the Chair of the CFPB, both of which are presidential appointees, and these can be expected to change with the new administration. What will be interesting is whether the administration itself will have a more far-reaching agenda in mind for the structure of banking regulation in the United States, including whether there may be a push for major changes in the regulation and supervision responsibilities of the Fed, the OCC and the FDIC.