FDIC’s Hill says banking regulators need to narrow focus

Federal bank agencies are “trying to do too much all at the same time” and need to better appreciate how the combined costs of all their proposals could play out for the economy, FDIC Vice Chairman Travis Hill said today during a speech in Washington, D.C. Hill noted that banking regulators are currently exploring new policies on a number of fronts, including proposals on capital standards and large-bank resolution, as well as possible future policies on bank mergers, liquidity rules and climate change.

Hill was skeptical of several proposals, such as new capital rules for banks with more than $100 billion in assets, which he said would result in higher prices and less availability of products and services. But at a broader level, he said regulators may be trying to do too much without accounting for the combined costs of all the new regulation. “There needs to be more prioritization, more appreciation of the aggregate costs of doing all this simultaneously, and more consideration of the uncertain economic environment,” he said.

At the same time, Hill pushed back on calls to undo congressionally mandated tailoring of bank regulation. “We benefit from having a financial system with banks of many different sizes and business models … Eliminating rules and standards that differentiate among types of firms will ultimately lead to a reduction in differentiation among firms themselves, incentivizing further consolidation and homogeneity in its place,” he said.