Noting that the U.S. financial system is “without a doubt far stronger” than it was before the crisis, Federal Reserve Governor Jerome Powell said today that the collective weight of post-financial crisis rules are too complex and that some of them are burdensome and may not be needed at all — especially in a context of sluggish productivity and GDP growth that calls for banks to “devote as much of their resources as possible to supporting economic growth.”
Powell emphasized the need for regulations to be “better tailored to meet our objectives,” noting that “in many cases new regulation has been inappropriately applied to small and medium-sized institutions” — a concern the American Bankers Association has long raised to regulators and lawmakers. He added that policymakers should “go back and broadly raise thresholds of applicability” to reduce burden.
As an example of the “excessively complex” regulatory environment, Powell discussed the ballooning supervisory expectations on boards of directors. “We need to allow boards of directors and management to spend a smaller portion of their time on technical compliance exercises and more time focusing on the activities that support sustainable economic growth,” he said. “We are currently reassessing whether our supervisory expectations for boards need to change to ensure that these principles, and not an ever-increasing checklist, are the basis of our supervisory work related to boards.”