ABA, state associations urge Fed to seek consensus on rulemakings

Federal Reserve rulemakings must have broad support of board members to make rules that endure the inevitable political swings, because without that consensus, “the regulatory pendulum could become its own destabilizing risk to the banking system,” the American Bankers Association and 52 state bankers associations said today in a letter to Chairman Jerome Powell.

In their letter, the associations thanked Powell for his dedication to collaborative decision-making and to building consensus. They urged him to continue that tradition. The letter comes as the Fed considers several regulatory proposals where board members have expressed differences of opinion, from proposed capital standards to lowering debit card interchange fees.

“Statutory authority gives the vice chair of supervision powers to develop and recommend regulatory proposals to the board,” the groups said. “While this power is broad, there is significant discretion in how it has been implemented. It is self-evident that the vice chair of supervision should actively seek out views of his fellow board members and make changes to rulemakings to accommodate their concerns in order to avoid the regulatory pendulum. At the same time, the responsibility of ensuring a clear, collaborative and consistent governance process clearly lies with the chair.”

The associations also urged Powell to consult with the Subcommittee on Smaller Regional and Community Banking, the body established by the Fed to provide oversight on matters related to those institutions. “Community banks play a vital role in local economies reinvesting local savings back into the community creating financial security, opportunities, and jobs,” they said. “Their unique challenges must be considered in regulatory decision making.”