In a letter Thursday, a group of 11 Republican senators demanded that the FDIC withdraw its proposed board governance rule, saying it would harm the safety and soundness of the U.S. financial system.
The FDIC last year proposed guidelines for banks with at least $10 billion in consolidated assets that, among other things, state that bank boards should establish risk management programs “appropriate for the size, complexity, business model and risk profile of the covered institution.” The rulemaking was advanced by a notational vote that occurred outside the board’s regular meeting schedule, with two members objecting to the proposal.
The letter, led by Sen. Thom Tillis (R-N.C.), states that the proposed rule “contains a multitude of issues and flaws,” such as imposing responsibilities on bank boards that traditionally fell on senior management. It also would implement a “one-size-fits-all” approach to board governance and seeks to impose burdensome corporate governance standards “all the way down to some of the smallest U.S. banks,” the senators said.
“While we agree that sound corporate governance is a necessity, the proposal represents a significantly flawed approach to prudential regulation that seeks to micromanage board affairs in a manner that will inject unnecessary uncertainty in key bank management activities,” the senators said. “It will unduly burden banks that serve and operate in small and rural communities. And, perhaps most concerningly, the proposal lacks consensus support among FDIC leadership, is out of step with other prudential regulators, and actively opposed by state supervisors.”
Other signatories include Senate Banking Committee Ranking Member Tim Scott (R-S.C.) and vice presidential candidate Sen. J.D. Vance (R-Ohio). Members of the House Financial Services Committee also urged the FDIC to withdraw the proposal in a May letter.
The American Bankers Association and 52 state bankers associations raised similar concerns in a February letter. The associations urged the agency to withdraw the proposal and instead explore releasing it as guidance rather than enforceable guidelines.
