Bank regulators have failed to consistently document their analyses and reviews of proposed and existing rules, with the Federal Reserve having not updated its policies for assessing its rules in three decades, the Government Accountability Office concluded in a new report.
The GAO review of financial services regulators noted that following the 2007-2009 financial crisis, regulators issued rules to help banks withstand financial and economic stresses. However, in doing so, they should have assessed the potential and actual effects—such as costs and benefits—of proposed and final rules. “But bank regulators didn’t consistently document their analyses of proposed rules and did few reviews of existing rules,” the agency said.
For example, the analyses that bank regulators conducted for many of the 22 major capital and liquidity rules issued from 2012 to 2021 “did not consistently reflect leading practices,” the GAO said. “The Federal Reserve also had little or no documentation of its analyses (other than descriptions in Federal Register notices) for three of 21 rules in which it was involved. Documentation for the other 18 rules did not consistently discuss methods and data used and how conclusions were reached.”
The Fed has not updated its policies for analyzing proposed rules since 1994, such as to require benefit-cost assessment and documentation of data sources, the GAO said. At the same time, regulators conducted few retrospective reviews of the effects of their existing rules despite an executive order directing them to do so. “FDIC adopted a policy in December 2022 to conduct at least one such review annually,” the GAO said. “[The Office of the Comptroller of the Currency] and the Federal Reserve do not have a similar policy. Implementing one could help them assess whether their rules have had intended effects and inform future rulemakings.”
The GAO recommended the Fed implement policies and procedures for consistently performing regulatory analyses that align with leading practices, including for documenting the analyses performed. It also recommended that both the Fed and OCC develop policies and procedures for systematically performing retrospective reviews of regulations.
