ABA Banking Journal
No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
SUBSCRIBE
ABA Banking Journal
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
No Result
View All Result
No Result
View All Result
ADVERTISEMENT
Home Compliance and Risk

What We Talk About When We Talk About ‘Deregulation’

March 1, 2019
Reading Time: 5 mins read

By Evan Sparks

A casual observer might be forgiven for thinking that when Congress passed—and President Trump signed—the Economic Growth, Regulatory Relief and Consumer Protection Act, or S. 2155, in 2018, that financial institutions were being “deregulated.”

That’s what hundreds of news headlines and ledes said.

  • “What’s in the Bank Deregulation Bill” —Wall Street Journal
  • “Senate Bill Part of Deregulation Wave” —Bloomberg
  • “The House easily cleared the Senate bank deregulation bill.” —Politico
  • “The bank deregulation bill the Senate just passed, explained” —Vox.com

Even the neutral C-SPAN network followed suit; when it showed the Senate vote on the bill, the chyron at the bottom of the screen described S. 2155 as a “financial deregulation” bill.

Moreover, advocacy groups and lawmakers that opposed S. 2155—such as Better Markets, Allied Progress and Public Citizen—frequently described it as deregulation. “The bill would deregulate 25 of the largest 38 banks in the United States,” said an article from the Center for American Progress, when it would do no such thing. “What problem are we trying to solve with ‘deregulation’?” Sen. Brian Schatz (D-Hawaii), an S. 2155 opponent, asked Federal Reserve Chairman Jerome Powell during a recent hearing.

“I don’t want to characterize what we’re doing as deregulation,” Powell replied.

So then: is it accurate to call S. 2155 a “deregulation” bill? The way we think about deregulation suggests not that some regulations are being updated or provisions of them repealed, but rather that a whole regulatory regime is being taken away. Consider the round of actual deregulation that took place in the airline industry more than four decades ago.

Prior to 1978, airlines faced stringent regulations about which interstate and international routes they could fly, as well as how much they could charge—in addition to safety regulation. After deregulation, the Civil Aeronautics Board was shut down. Airlines could fly more or less where they wanted and charge whatever they wanted. The safety regime remained in place, overseen by the Federal Aviation Administration, but the industry-specific regulation of the airlines’ business strategy disappeared.

Now that’s deregulation.

‘False sense of security’

What happened in S. 2155 is best described as a readjustment, says ABA EVP Wayne Abernathy. “The provisions in the law are meaningful reforms that tailor regulatory requirements in helpful ways,” he says. “S. 2155 is a good first step, but there is much more Congress and the agencies can do.”

Abernathy points out how S. 2155 is genuinely helpful. It reduces the time and expense of stress tests for many institutions for which the tests were ill-suited. It allows many community banks to opt out of complex documentation exercises and calculations for regimes like Basel III and the Volcker Rule that were never meant to apply to them. It helps more community banks finance growth.

And yet, the widespread language of deregulation by the media and S. 2155 opponents may have oversold to some bank leaders just how sweeping the bill actually is. “There may be a misperception about what the reg reform means from a true compliance management perspective,” says ABA SVP Ryan Rasske. “While some banks may benefit from automatic Qualified Mortgage status for certain mortgages, the exemption from new HMDA data fields and an 18-month exam cycle, the expectations with regard to the alphabet soup of compliance regulations have not changed.”

Wolters Kluwer’s annual regulatory and risk management indicator showed that risk and compliance concerns dropped by 18 percent from 2017 to 2018. However, Wolters Kluwer Senior Adviser Tim Burniston points out that nearly two-thirds of survey respondents still rank their concern levels as high. “The level of concern is still way up there.”

Sometimes bank management teams and boards of directors—not always in the weeds of regulatory compliance—can be where the disconnect is, observers say. “You’ve got a board composition that may lack either the expertise or capacity, the capability or the skill sets to exercise appropriate oversight and they’re trying to exercise that oversight in a regulatory environment where they have been lulled into a false sense of security by this word ‘deregulation,’ which isn’t really true,” says Pam Perdue, EVP and chief regulatory officer at Continuity. “We’re going to see the highest volume of regulatory activity in 2018 than we have ever seen numerically.”

Some compliance officers are feeling a pinch from above. Richard Harvey is a former community bank compliance officer who now serves as general counsel for a cryptocurrency firm. With the change in administration, he says, “no one should be surprised that folks on the boards of directors and in executive management thought that we’re not going to have to have as much of a robust compliance function as we have had in the past.”

With national media talking about financial deregulation, he says, “they look at the headlines.” Harvey’s management team asked him “Why isn’t this a good time for us to scale back on our compliance staffing? Can’t we reduce the number of FTEs within the compliance function?”

Regulatory relief: still a job for compliance risk management

However, Carrie Connell, a senior manager at Porter Keadle Moore, points out that even beneficial regulatory calibration still requires careful attention by compliance risk managers. “I’m sure if you talk to any compliance officer right now, they’re just trying to keep their head above water with the changes that are constantly occurring,” she notes. “One change has this huge effect: changing in systems, changing in policies and procedures.”

In fact, financial regulatory reforms made over the past five decades have rarely resulted in fewer regulations. Stephen Matteo Miller, a senior research fellow at the Mercatus Center at George Mason University, recently analyzed words like “shall,” “must,” “may not,” “required” and “prohibited” that create requirements or restrictions in the Code of Federal Regulations. Since 1970, these terms—which are the ones that catch the eye of compliance officers—have risen each year on average 1.4 percent for the OCC, 2.5 percent for the Fed, and 2.6 percent for the FDIC. “If anything, the results here suggest that rather than deregulation, there’s been an increase in regulatory complexity,” writes Miller.

It’s also important for compliance and risk professionals to provide education that counters the false “deregulation” narrative, experts say. “The bank needs to push that information and put it in front of their board and their executive team members so that they are constantly getting that education on top of internal resources that they bring in to educate the board,” says Dave Daniel, VP at Banc Intranets.

And an educated board needs to turn that right back around, adds Faith Wray, a senior risk and compliance consultant at ProfitStars. “They really have to start asking questions and hold management’s feet to the fire to understand what the risks are and how they’re being mitigated,” she says.

ADVERTISEMENT

Ultimately, recalibration in regulation may streamline some cumbersome operations or remove some illogical impediments to growth—but it’s not intended for banks to scale back their compliance risk management efforts. “That should have no significant bearing on whatever you develop [in] a compliance infrastructure to support the business model you have established and want to maintain,” says Richard Harvey. “Your compliance infrastructure should be as dynamic as your bank.”

Burniston agrees. “This is not the time to take your foot off the pedal,” he says. “If the industry isn’t able to stay on top of what’s out there, the likelihood that they’ll end up with more responsibilities becomes higher.”

Tags: DirectorsRegulatory burdenRisk managementS 2155
ShareTweetPin

Author

Evan Sparks

Evan Sparks

Evan Sparks is editor-in-chief of the ABA Banking Journal and senior vice president for member communications at the American Bankers Association.

Related Posts

CFPB launches ‘tip line’ to report on bureau employees

ABA, associations urge CFPB to rescind changes to adjudication process

Legal
June 13, 2025

ABA joined three associations in voicing support for a CFPB proposal to rescind a set of changes to the bureau’s rules that, among other things, gave its director authority to resolve adjudication hearings overseen by the agency.

Senate bill would mandate discount window testing, modernization

Proposal to end Fed interest payments to banks faces pushback

Newsbytes
June 13, 2025

Senate Banking Committee Chairman Tim Scott (R-S.C.) said a proposal to prevent the Federal Reserve from paying interest to banks “is not a decision to be rushed” and must follow proper parliamentary procedure, Bloomberg Law reported.

Research roundup: ABA holds policymakers accountable with independent analyses of key banking issues

Senate passes ABA-advocated ‘trigger leads’ bill

Mortgage
June 13, 2025

The Senate granted unanimous consent to S. 1467, an ABA-advocated bill that would would prevent credit reporting agencies from selling so-called mortgage trigger leads to lenders in most circumstances.

Old ways in a new world of banking

Old ways in a new world of banking

Community Banking
June 13, 2025

Meet American Bankers Council chair Jim Ryan, chairman and CEO of Old National Bank.

Fifth Circuit grants ABA mandamus, vacates transfer order for second time

ABA, CBA support maintaining confidentiality of CFPB nonbank risk determinations

Compliance and Risk
June 12, 2025

The American Bankers Association, joined by the Consumer Bankers Association, expressed support for the Consumer Financial Protection Bureau’s proposal to maintain the confidentiality of decisions to exercise the agency’s supervisory authority over a nonbank entity that may pose...

ABA experts see reasons for optimism amid economic, regulatory uncertainty

ABA experts see reasons for optimism amid economic, regulatory uncertainty

Compliance and Risk
June 11, 2025

The Trump administration has rolled back a broad range of banking guidance and regulatory proposals made in the last few years, and while bankers are used to regulatory whiplash when administrations change, it is possible some of changes...

NEWSBYTES

ABA, associations urge CFPB to rescind changes to adjudication process

June 13, 2025

ABA DataBank: May inflation cooler than expected, but still above Fed’s 2% target

June 13, 2025

Consumer sentiment rebounds in June

June 13, 2025

SPONSORED CONTENT

AI Compliance and Regulation: What Financial Institutions Need to Know

Unlocking Deposit Growth: How Financial Institutions Can Activate Data for Precision Cross-Sell

June 1, 2025
Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

April 25, 2025
Outsourcing: Getting to Go/No-Go

Outsourcing: Getting to Go/No-Go

April 5, 2025
Six Payments Trends Driving the Future of Transactions

Six Payments Trends Driving the Future of Transactions

March 15, 2025

PODCASTS

Podcast: Old National’s Jim Ryan on the things that really matter

June 12, 2025

Podcast: What bankers need to know about ‘First Amendment audits’

June 5, 2025

Podcast: Accelerating banking for quick-service restaurants

May 8, 2025
ADVERTISEMENT

American Bankers Association
1333 New Hampshire Ave NW
Washington, DC 20036
1-800-BANKERS (800-226-5377)
www.aba.com
About ABA
Privacy Policy
Contact ABA

ABA Banking Journal
About ABA Banking Journal
Media Kit
Advertising
Subscribe

© 2025 American Bankers Association. All rights reserved.

No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive

© 2025 American Bankers Association. All rights reserved.