Agencies Looking at Areas to Relieve Regulatory Burden

Regulatory agencies are seeking targeted ways to relieve regulatory burden, according to senior officials speaking at the American Bankers Association’s Government Relations Summit this morning. For example, the Federal Reserve has successfully launched a voluntary off-site loan review exam option, and the FDIC is currently piloting software to allow “flip a switch” access to loan files on core processors, said Doreen Eberley, director of risk management supervision at the FDIC.

Agencies are also training examiners to better understand the banks they supervise. For example, the Federal Reserve has required longer and more specific training to minimize the chance that examiners will formally or informally allow large bank requirements to “trickle down” to smaller banks, said Maryann Hunter, deputy director of supervision and regulation at the Fed. The OCC is also trying to provide more clarity in its exam communications on “significant issues” versus “nice-to-dos.”

However, while agencies are trying to tailor supervision, they are more limited in tailoring the rules themselves. “Tailoring regulation to a business model becomes very tricky” compared to the “bright line” of asset size, said Hunter. “At this point we’re more or less sticking with asset size.”

While the CFPB is not easing supervision of mortgage servicing, where it has noticed “somewhat inconsistent adoption,” or of third-party risk management, Chris D’Angelo — the bureau’s associate director for supervision, enforcement and fair lending — explained that the bureau is spending more time supervising third-party service providers in the servicing area, where “we’re often seeing the problems.” He added that the bureau is now beginning its mandated five-year retrospective review of its “major mortgage rules,” including the Ability-to-Repay Rule.