S. 2155 Rule Changes to Be Done by Year-End, Regulators Say

The heads of the banking agencies told lawmakers that they expect to have regulatory changes from the S. 2155 regulatory reform law implemented by year-end. Testifying before the House Financial Services Committee today, Federal Reserve Vice Chairman for Supervision Randal Quarles said that the agencies are “on track to complete the implementing actions for S. 2155,” adding that they would “have the bulk of the implementing actions completed by the third quarter of this year, and all of them completed by the end of this year.”

Items still outstanding include a final rule on the treatment of high-volatility commercial real estate, a framework for applying enhanced prudential standards to banks with more than $100 billion in assets, an appraisal exemption for certain rural real-estate transactions and the finalization of the community bank leverage ratio.

Regulators also faced questions from several lawmakers who raised concerns about the current expected credit loss standard and its effect on credit availability. When asked about the extent to which the agencies themselves have evaluated the implications of CECL, FDIC Chairman Jelena McWilliams acknowledged that “it’s difficult, because there are so many different ways of implementing CECL.” As implementation moves forward, “our hope is that. . . we will be able to get the information from the first tranche of banks that are complying,” she said.

Comptroller of the Currency Joseph Otting added that regulators will be closely monitoring the regulatory capital effects of CECL over the three-year phase-in period, noting that “there’s no magic to that number—if there are other issues, we’ll be happy to consider that.” Added Quarles: “As we see the consequences of CECL during the phase-in period, we have the tools to respond on the capital side.”