Speaking at the agency’s community banking conference today, FDIC Vice Chairman Thomas Hoenig again offered a “legislative remedy” for excessive and ill-tailored regulatory burden for banks engaged in what he called “traditional banking activities,” which would encompass most community banks and some regional banks as well.
Hoenig’s proposed regulatory relief, which would require congressional action, would apply to well-capitalized banks that hold no trading assets or liabilities, that hold no derivative positions apart from interest rate swaps and foreign exchange derivatives, that have a 10 percent equity-to-assets ratio and that have a total notional value of derivatives exposures below $8 billion — a figure increased from $3 billion when he floated the idea in the spring of 2015.
Banks that meet these criteria under Hoenig’s plan would be exempt from all Basel capital standards and calculations, certain Call Report schedules, stress test requirements and appraisal requirements. They would be able to count portfolio-held mortgages as Qualified Mortgages and be relieved of certain Home Mortgage Disclosure Act reporting requirements. Hoenig’s proposal would also eliminate requirements to refer possible or apparent fair lending violations to the Justice Department “if judged to be minimal or inadvertent.”
Hoenig acknowledged that industry concerns about his 10 percent leverage ratio present a barrier to his proposal advancing. The American Bankers Association and the state associations have strongly advocated efforts to tailor regulations appropriately to banks’ business models and risk profiles, such as the TAILOR Act currently moving through the House. The association continues to work with policymakers on both regulatory and legislative approaches.