FDIC Watchdog: Clearer Criteria Needed for Regulatory Cost-Benefit Analyses

The FDIC “does not currently have a consistent process in place” for conducting cost-benefit analyses to determine the effects of regulations, nor does it have established criteria for which rules are “significant” enough to warrant such an analysis, according to a report by the agency’s Office of the Inspector General today.

Based on a review of new rules issued between January 2016 and December 2018, the OIG found that the FDIC performed cost-benefit analyses on just 37%. No explanation was provided for why the other 63% did not require analysis. The report also noted that the FDIC’s cost benefit analysis process was not consistent with best practices, such as seeking the input of its economists when rules were initially developed or disclosing cost benefit analyses to the public. “Absent clear processes and criteria, demonstrating that FDIC regulations justify their costs remain a fundamental challenge,” the agency watchdog said.

The report comes amid a concerted effort by FDIC Chairman Jelena McWilliams to increase transparency at the agency. The FDIC recently issued a request for information seeking feedback on the effectiveness, costs and benefits of its regulatory actions, which ABA responded to in a letter last month.

Other issues flagged by the OIG include the FDIC’s ability to keep pace with financial technologies, ensure crisis readiness and share threat information with banks and examiners.